Sportswear Q2 Sales To Better, To XTEP International "Overweight" Rating

Abstract:

L Q2 sales data come out, sportswear companies sell better. Recently, many sports apparel companies have disclosed 2019Q2 operation data. Overall, Brand Company has achieved relatively good sales results on the basis of high base numbers in the same period last year. 2019Q2 Anta (02020) main brand retail sales recorded a year-on-year growth of 10%-20%, and sales growth rate was higher than that of Q1. Other brands grew by 55%-60% over the same period last year. Lining (02331) 2019H1 net profit is about 709 million, an increase of more than 440 million, an increase of more than 164% over the same period, exceeding market expectations. Revenue grew by more than 30%, and profits from continuing operations increased by no less than 240 million, an increase of more than 90% over the same period last year. The growth of one-time non operating profit is not less than 200 million. XTEP international in 2019 Q2 outstanding performance, retail sales grew by more than 20% over the same period, basically unchanged from the first quarter, high growth can continue. Sales in the same store maintained double-digit growth over the same period last year, and Q2 sales rebounded.

L continues to recommend XTEP international to increase its rating. Q2's sales performance is bright, and the current valuation is still at a low level. After three years of reform, marginal improvement appeared, and income and profit in 2018 resumed growth. In terms of products, R & D centers around core runners and combines world-renowned suppliers to form a complete functional system. In the field of publicity, sponsoring many marathon events, enhancing the relationship between brand and running, and developing entertainment marketing to keep close to young consumers. Flat channel reform, reduce dealer level, accurately grasp sales data and channel inventory. For the first time in six years, positive growth has been restored. Multi brand matrix is gradually accelerating. In 2019, joint venture outdoor brand Merrell and high-end running leader Saucony purchased high-end brands K-Swiss and Palladium. The unique positioning of sub brands will be highly complementary to the main brands and occupy the corresponding market segments. It is expected to form a performance driven relay tier.

L investment recommendations: two main investment lines: 1) high quality track, competitive advantage is highlighted, endogenous growth is strong: XTEP international, biefin, Antarctica, Semir apparel; 2) high-end clothing: Song Li Si, di Su fashion.

L plate review: Shanghai Composite Index (-2.67%), growth enterprise market (-1.92%), Shenzhen Stock Index (-2.43%), Shanghai and Shenzhen 300 (-0.22%). This week, the textile and garment industry dropped by 2.97%, which was at the median level in the shwan industry. The textile manufacturing sector dropped by 2.48%, and the home textile home plate fell by 3.23%.

L risk factors: retail environment is not as good as expected.

1. sportswear Q2 sells well and continues to recommend XTEP international.

1.1.Q2 key sports apparel company sells well, quality Racecourse helps the rise of national cards.

In the two quarter, sales of key sports apparel companies are improving. Recently, a number of sports apparel companies disclosed operational data in the two quarter of 2019. On the whole, Brand Company achieved fairly good sales results on the basis of high base in the two quarter of last year. Among them, Lining's first half performance forecast showed that net profit increased by 164% over the same period last year, leading the industry. XTEP international maintained high growth over the same period last year and improved its profitability. Anta's main brand revenue grew faster, and many brands increased their performance elasticity.

Optimistic about sports and high quality track, the rise of domestic brands is in sight. We believe that sportswear, as an excellent sub industry in recent years, will continue to maintain a good market in the future. According to Euromonitor estimates, the scale of China's sports industry will continue to expand in the next five years, with an average annual growth rate of over 10%. Industrial policy supports superposition of the Winter Olympic Games. The consumption of Chinese sports industry still has great room for development and huge potential for growth. In recent years, domestic brands have striving constantly to improve themselves. The marginal optimization effect is remarkable, the brand strength is strengthened, and the market is expanding constantly.

1.1.1. Anta Sports: main brand speed up, multi brand boost performance growth

Anta's brand growth rate is higher than Q1. 2019Q2 Anta's main brand retail sales recorded a year-on-year growth of 10%-20%, while other brands grew by 55%-60% over the same period. In the first half of the year, according to the overall performance, Anta's main brand grew at a low level of 10%-20%, while sales of other brands increased by 60%-65% over the same period. As far as the main brand is concerned, sales growth is higher than that of Q1. The main department is to adjust the existing shops of Anta adults and upgrade the new business formats such as shopping centers and department stores, so as to improve the efficiency of single stores. Anta children, the shop continues to land, the channel space is vast, still in the high-speed expansion stage.

FILA continues to contribute to growth, and multi brand strength helps. FILA continued to grow in the same period last year, mainly due to channel expansion and same store revenue growth. Practice has proved that FILA has become a new driver of the company's current growth. FILA's main brand positioning sports leisure, independent style, has formed a fairly broad audience base. The sub card FILA FUSION takes the younger route and works closely with the new generation consumers. DESCENTE, KOLON, Sprandi and other brands go hand in hand to jointly promote performance growth.

Amer sports acquisition completed, strong growth is not afraid of market doubt. Anta sports's acquisition of Amer sports has been completed. It is expected that the related fees will be confirmed later, which will affect the near profits to a certain extent. From a long-term perspective, Amer sports owns high-end sports brands such as sports and so on. Combined with the strong resources of the Chinese market in the Anta, the future synergy is worth looking forward to. Anta sports has recently been sold short by overseas institutions. At the very first time, the company clarified the feedback and carried out a powerful counterattack to dispel the doubts of investors. After twists and turns, it is clear that Anta can play a leading role in the sports market.

1.1.2. Lining: net profit increased substantially, exceeding market expectations.

The growth of performance exceeded expectations, and net profit increased by more than 164% over the same period last year. Lining announced Earnings Preview announcement, 2019H1 net profit was about 709 million, an increase of more than 440 million, an increase of more than 164% over the same period, exceeding market expectations. Revenue grew by more than 30%, and profits from continuing operations increased by no less than 240 million, an increase of more than 90% over the same period last year. One time non operating profit growth of not less than 200 million, mainly investment income.

Sales grew strongly. 2019Q1 Lining platform retail sales year-on-year 20%-30% low segment growth. Among them, the offline channel recorded 10%-20% high growth, and the electricity supplier channel recorded 40%-50% low segment growth. We expect Q2 sales to continue to grow at a high level, so that revenue growth in the first half of this year is over 30%. In terms of channel quantity, Lining young contributed to the growth of main stores in the first quarter, a net increase of 22 to 815 compared with the beginning of the year. The Lining sales point was 34 to 6310 fewer than the beginning of the year. The company continues to optimize the channel structure. The share of shopping center stores is improved, and the quality of stores is improved.

The tide of the country is leading the fashion and moving towards the rising channel. Lining's main brand returns to the mass consumer market, and technological innovation guarantees professionalism. Multidimensional marketing increases brand exposure, and the international fashion show creates explosive products. Clever integration of Chinese elements, close to fashion trends, store image upgrading, to win over young consumers. Since 2017, the operation has improved and the gross profit margin has been raised synchronously, and the profit level has reached a new high.

1.1.3. XTEP International: high base growth continued, discount level improved

The two quarter continued to grow. XTEP international Q2 performed well in 2019. Retail sales growth (including online and offline channels) increased by more than 20% over the same period, basically unchanged from the first quarter, and high growth continued. Sales in the same store maintained double-digit growth over the same period last year. In view of the same double-digit growth rate of 2018Q2, the 2019 continued to improve on the high base last year, and the store efficiency increased significantly. In terms of sales discounts, as the Q1 company launched the Spring Festival promotion activities, the Q2 discount level rebounded, and the proportion of the positive price products increased, and the profit level climbed.

Technology helps, focus on running shoes, and professional marketing releases positive signals. XTEP international is determined to become the preferred brand of Chinese runners. Product development focuses more on running supplies and related accessories, and meets the functional needs of runners at different professional levels in shoes and clothing. In recent years, sports technology R & D investment has been continuously increased, and a complete shoe shoe technology system has been formed to improve clothing technology content and optimize the use experience. At the publicity side, XTEP targeted, sponsored marathon events, enhanced the relevance of brand to running, and passed the marketing mix such as endorsement sponsorship to convey the trend of brand younger trend to consumers, attracting new generation consumers.

Channel flat transformation perfect ending, the first expansion of the number of channels in six years. The company promoted flat channel reform in 2015-2017, reduced the level of distribution, reduced the level of distribution channel from multi-storey to two levels, and encouraged dealers to set up self owned stores to optimize the structure of emerging channels. The flattening of distribution channels makes shops easier to manage, increases transparency, reduces inventory risk, and improves distributors' operational efficiency and profitability. As of December 31, 2018, XTEP had 6230 retail outlets at home and abroad, an increase of 3.83% over the same period last year. In the first six years of adjustment, the number of stores in 2018 is increasing, and there are about 200 outlets in China, which are concentrated in two or three line cities. Among them, the proportion of Direct stores accounts for about 60%, and about 1500 of the existing channels are shopping center stores, accounting for about 25%. With the continuous opening of Future Ltd stores, the proportion of shopping center channels will be further enhanced, and the channel structure adjustment and optimization will continue.

Multi brand operation has taken shape, covering different levels of consumer groups. In March 2019, XTEP jointly operated outdoor brand Merrell and high-end running leader Saucony. In May, it invested in the acquisition of E-LAND subsidiary, adding new high-end brands K-Swiss and Palladium. The company's multi brand matrix is gradually accelerating. In the future, in the middle and high-end sports market of a second tier city, the company will occupy the share with the international brand, face the three or four line city and pursue the high performance price ratio consumer, then capture through the main brand XTEP. For the long-term planning, the company's internal brand and price echelon level are gradually formed. The unique positioning of multi brands will be highly complementary to the main brands and occupy the corresponding market segments. It is expected to form a performance driven relay tier.

1.2. continues to recommend XTEP international. Q2's performance is high and its valuation is still at a low level.

We released the XTEP international deep report in June 22nd. The company's sales in the two quarter were dazzling, and the current valuation is still at a low level. As the leading sporting goods group in the country, the company is developing the east wind and enriching the brand lineup, which is expected to usher in new opportunities and increase its rating.

The sports industry is booming, and domestic brands are ushering in new opportunities. With the dividend of industrial policy, the sports industry has maintained rapid growth in recent years. In 2018, the scale of China's sports apparel market reached 264 billion 800 million yuan, an increase of 19.52% over the same period last year. With the increase of per capita income level and the continuous popularization of health concept, it is expected that the growth rate will be maintained at an annual average of about 10% in the next 5 years. At present, the global sports market share keeps concentrating on the head brand, showing the leading edge, and the international sports brand occupies the leading position. Under the new consumption environment, domestic consumers' shopping preferences gradually change from branding to functionalization and experience, and the attention of domestic products is improved. Domestic brands win favorable development opportunities.

Three years of reform have accumulated a lot. The company experienced three years' reform, and the marginal improvement appeared. In 2018, the profit and profit of the company resumed growth. In terms of products, R & D centers around core runners and combines world-renowned suppliers to form a complete functional system. In the field of publicity, sponsoring many marathon events, enhancing the relationship between brand and running, and developing entertainment marketing to keep close to young consumers. Flat channel reform, reduce dealer level, accurately grasp sales data and channel inventory. Under the guidance of big data, the number of channels was 6230, and 230 stores opened in 2018. For the first time in six years, the growth rate was positive. Online O2O mode helps stock sharing, pushing electricity supplier sales to a new high with a 20% revenue share.

Enter the high-end market and enrich the brand lineup. In 2019, the company first operated a high-end sports brand through joint venture to test the water market. Follow up the further acquisition of K-Swiss and Palladium, and make use of the advantage of domestic channel resources to help international famous brands, and the multi brand camps are beginning to take shape. With the continuous enrichment of medium and high end brands and products, the existing market vacancies can be effectively compensated, and the synergy effect is worth looking forward to, so as to create new space for further business development.

The first coverage is given to the overweight rating. As a famous local sports brand, the company focuses on the field of running and forms its own core advantages. In the first three years, the effect of reform is obvious, and the turning point of performance is coming. The net profit of 2019-2021 years is expected to be 7.93/9.41/11.03 billion yuan, an increase of 20.7%/18.8%/17.2% compared with the same period of the previous year. The current market value corresponds to PE in 2019, which is 13 times.

2. investment advice

We emphasize the leading industry of recommendation, especially with the characteristics of stable performance, undervalued value and high score red. In the medium to long term, it is still recommended to subdivide the leader of high quality and high quality racetrack, with certain growth and deepening of the moat.

1) high quality raceway: recommended XTEP international, Be Meleven, Antarctica, Semir apparel. XTEP International: a famous local sports brand, focusing on the field of running, forming its own core advantages. In the first three years, the effect of reform is obvious, and the turning point of performance is coming. Bi: as a scarce target of high-end leisure, and excluding the adverse effects of weather and consumption slowdown, it still keeps pace with the expansion of stores in the early stage, and the market share steadily rises, and sales maintain high growth. Antarctic electricity providers: fully enjoy the electricity and low line consumer dividends, relying on the mainstream business platform GMV high-speed growth, the future multi brand, multi platform and multi category quite obvious. Semir Costumes: as the leading company of mass leisure clothing, it is well distributed in the three or four line city channel, catering to the low and middle consumption. The brand of children's wear Barbara accurately cuts into the children's field and occupies the competitive advantage of the future blue ocean.

2) medium and high end clothing: recommend song and fashion. As a high-end female dress leader, the multi brand strategy has been steadily advancing, while the traditional brand has been growing steadily and the brand has been developing at a high speed, and the multi brand operation capability is being gradually certified. The company is a local high-end high-end fashion group. The company has obvious advantages in design, marketing input and member operation industry leading, channel adjustment and terminal management enhanced, and future direct business and electricity supplier stimulating growth.