Anta -- The Next Nike ADI?

In July 10, 2007, Anta sports (02020.HK) was listed on the Hongkong stock exchange, with a selling price of HK $5.28 and a market value of HK $13 billion. In November 6, 2019, Anta set a record high of HK $79.45, and its market value reached HK $214 billion 500 million (HK $198 billion 853 million in November 30th). Over the past 12 years, the domestic sports brand, which came out of Jinjiang, Fujian, has achieved a leap of 15 times the market value of the stock market, and has been firmly on the leading position of the local sports apparel industry.

In the past year, Anta sports has achieved a 115.836% share price growth.

　　 Summary of financial data

Last year, Anta realized 40.3% of its main business revenue growth, of which Anta's main brand was 18.3%, mainly driven by children's wear brands. FILA was 79.9%, and was promoted by positive factors such as market influence and electricity supplier development.

Last year, Anta's gross profit increased by 45%, Anta's main brand 14%, FILA 79.2%.

Anta's main business income in recent five years

Anta main business income: according to the product, followed by footwear, clothing and decoration category.

　　 Industry profile

In recent years, the head effect of China's sports apparel industry has increased significantly, and the concentration has increased rapidly. In 2018, in terms of retail sales, the top six enterprises in China's sports apparel industry were Nike, Adidas, Anta, Lining, Cage and XTEP. The market share of the faucets expanded rapidly, and many small and medium-sized enterprises were squeezed out of the market, and the industry shuffling was initially completed.

In the local enterprises, Anta is the first leader in the sports apparel industry. In 2018, the company's operating income was 24 billion 120 million yuan, 2.3 times that of the second Lining. In addition, Anta's main brand and FILA are outstanding at the leading and growth level of the industry, and the comprehensive strength is strong.

"Regional market share" (vertical axis) and "compound growth rate of retail sales" (horizontal axis) two indicators, representing the brand's industry leading and growth. In terms of leading industries (second quadrants), Adidas, Nike and Anta brands remain absolutely ahead of the market, and their market share is over 8%. In terms of growth (fourth quadrants), Skech and FILA remain the leader, and the composite growth rate of retail sales over the past 3 years is over 40%. Briefly sum up, Anta's main brand and FILA are outstanding in two aspects: leading and growth, showing strong comprehensive strength.

　　 Core strategy

Anta adheres to the development strategy of "single focus, multi brand and all channels", and takes multi brand operation as the strategic core. At present, Anta's brand lineup is rich, with professional sports (Anta, Anta children, Sprandi), fashion sports (FILA, Kingkow) and outdoor sports (Kolon, Descente, Amer Sports) three major business units. Among them, Anta's main brand is located in the mass market and provides cost-effective sports products. In 2009, FILA acquired a great success in sports and fashion category. After 2016, the company acquired a series of brands such as Desanto, Spandi, Ke Long and Xiao Xiao Niu through acquisitions or joint ventures, so as to make reserves for the future. Among them, Desanto and kirong as outdoor sports brands, positioning high-end and professional orientation, Xiao Xiao cattle as a brand of children's clothing, positioning is biased towards high-end fashion, Spandi is the main category of fashion sports shoes.

　　 Anta's main brand performance

Today, Anta's main brand accounts for 51% of the company's total revenue. From nearly 10 years of operating data, the annual growth rate of Anta's main brand revenue is 9%, higher than that of Lining (4%), XTEP (7%) and 361 degree (4%).

The reason why Anta's main brand is in the forefront of the industry

First, R & D, Anta's R & D investment in 2018 was 593 million yuan, far exceeding Lining, XTEP and 361 degrees. And from the trend, the gap is still widening. Technology (such as shock, rebound, breathability, etc.) is very important for sports brand. At present, Nike, the global sports leader, has nearly 31457 invention patents in the past 10 years, such as Air, Flyknit, ZoomX and React. Anta has 826 patents in the past ten years, ranking first in China.

Followed by brand influence, Anta as the leading brand of domestic sports, from the perspective of capital investment, advertising and marketing expenses in 2018 were 2 billion 919 million yuan, which were 2.67/3.00/5.22 times of Lining / XTEP /361 degrees, and the capital advantage was obvious. From the perspective of resources, Anta is becoming more and more international brand, striving for international influence, 2009 sponsoring the Olympic Organizing Committee of China, building champion dragon clothing, completing cooperation with CBA in 2013, switching to NBA in 2014, signing NBA superstar Clay Thompson in 2015, and launching KT series products, aiming to build Anta into "AirJordan". KT1 basketball shoes were sold out in 2 days, and KT4 also attracted nearly 1000 American consumers to rush to buy. It is estimated that the sales of such products have exceeded 1 million pairs. At the same time, its global search fever continues to improve, becoming the star product of the company.

Finally, Anta has excellent management capabilities for online and offline channels and supply chains, as well as strong integration and integration capabilities for market segmentation brands. In 2017, Anta enabled 30 employees to reach 3000 pairs of shoes daily production line, and the production efficiency was high. The real-time ERP system is used to closely monitor the more than 7300 outlets, and timely measures are introduced to improve the efficiency of the store.

　　 Anta children's wear

The long-term bonus of the second child policy will bring about 280 billion yuan of children's clothing market. Anta, Lining, XTEP and 361 degree "have been". In contrast, the Anta children's clothing which started in 2008 is the earliest entry to the children's sporting goods market.

In 2016, the overall sales volume of Anta children's clothing brand was close to 2 billion yuan, accounting for nearly 15% of Anta's 13 billion 350 million yuan annual revenue. The FILA kids set up in 2015 also successfully made up for the shortage of Anta's children's clothing in the high-end market. In October 2017, Anta also used 60 million Hong Kong dollars to keep the high-end children's clothing brand laughing, and constantly improving the market of children's clothing. As of June 2017, Anta's independent children's wear shops increased to more than 2100, compared with 228 in 2009, nearly 10 times.

In this piece, the latecomer Lining has to go much more conservative: in 2017, Lining group's children's clothing brand Young and KIDS shops opened 20 in the first half of the year, plans to add 70 in the second half of the year, and expected to have a net profit of about 30 million yuan.

　 FILA performance

At present, FILA is the main factor driving Anta's high growth. Anta owns many brands, from the first half of 2019 financial data, FILA revenue accounted for 44% of Anta's total revenue, Anta's main brand 51%, other brands 5% (still in the incubation period). From the point of view of terminal pipeline, FILA has achieved high growth in the past two years. In the four quarter of 2018, it reached a year-on-year growth rate of over 80%. This bright business has become the main driving force for the company's performance growth.

In fact, FILA's trademark right to use and operate in China was bought by Anta in 2009 at a price of 332 million yuan from BELLE international. At that time, China's FILA business lost nearly 40 million yuan, but Anta took a series of reform measures in 10 years, turning losses into profits in 2014, and opened up a road of rapid development.

Anta repositioned FILA in 2011, combining fashion, sports and leisure, integrating its Italy brand name gene, and constantly using the global design resources sharing mechanism of FILA to continuously pour the trend into the brand of FILA China. At the same time, FILA positioning high-end fashion sportswear, the guest price as high as 1400+ yuan, clothing sales accounted for a higher proportion, and shoes dominated Adidas and Nike formed a differential competition. Coupled with the appearance of international fashion week, signing of domestic and international traffic stars, and cooperation with famous designers, FILA's fashion brand image has been continuously strengthened.

In addition, there is another important factor in the success of FILA, that is, compared with Nike and Adi, nearly 6 of the revenue from franchisees in China, FILA has always been a direct mode in Anta's hands. The direct camp mode helps to grasp the service of the stores and understand the market demand more directly. With Anta's high regard, FILA grew to 600 stores in 2015 to 1652 stores in 2018.

From the company's gross profit margin and FILA's share of revenue, the more FILA stores open, the higher the revenue. Meanwhile, Anta's profit has increased from 37.95% in 2012 to 52.64% in 2018. No wonder muddy water will challenge Anta's ability to earn more money than the industry.

　　 Future outlook

On the basis of FILA's great success, Anta's acquisition of Amer (Finland's high-end sporting goods company amamin sports) at the end of 18 has further promoted the process of multi brand internationalization. Amer Sports is an internationally renowned sporting goods group. Its international brands such as Salomon, Arc 'teryx, and Precor occupy an absolute leading position in their respective subdivision areas. In 2018, Amer Sports's global revenue was 2 billion 680 million euros, up 4% over the same period last year, and the growth rate was steady.

Anta's original brand accelerates the internationalization process. In 2018, the total revenue of Amer Sports outside Asia amounted to about 85%. The main brands of Amer originated in all countries in Europe and America. Anta can accelerate the internationalization process by using Amer's existing channels and operation experience in overseas areas, and it is expected to build a world-class multi brand sports group against Adidas and Nike.

Amer's brand is expected to learn from FILA's successful experience in China. FILA's huge success in China has proved that Anta has the capability of operating high-end foreign brands. In recent years, the exploration of high-end brands such as Descente, Kolon and Sprandi has also accumulated important practical experience for the company, which superimposed the organizational restructuring in 2019. In the long run, Amer Sports is expected to become a new growth point for the company's future domestic market.

Thickening the overall strength of Anta brand, fully absorbing Amer's technology and supply chain advantages. Many brands of Amer Sports are famous for their professionalism, mainly due to the accumulated product technology reserve and quality supply chain resources accumulated by Amer over the years. Amer has more than 200 core suppliers worldwide, and its global distribution is uniform, and its long-term cooperative relationship is stable.

Cut into the extensive sports outdoor market. Amer Sports has many excellent professional subdivision brands, including skiing, bicycles, diving, sports watches, fitness products and so on. With the opening of the 2022 Winter Olympic Games, it is expected to drive the development of China's outdoor sports market, and Anta will fully benefit at that time.

　　 Summary

Overall, Anta's performance is at a relatively high growth level. In the first half of 2019, revenue and profit attributable to shareholders grew by 40.3% and 27.7% respectively. Combined with the growth rate, Anta's rolling price earnings ratio of 38 (industry average of about 30) is not too high. Recently, such as UBS, Guoxin and other brokerages also gave Anta 85-86 Hong Kong dollar target price rating. According to the "13th Five-Year plan" of the National Sports Bureau, the scale of China's sports industry will exceed 5 trillion yuan in 2025. We can continue to focus on the performance after Anta.