Sitting On FILA, The "Cash Cow" Continues To Grow At A High Level. What Exactly Does Anta Have?

Anta Sports Products Limited (hereinafter referred to as "Anta sports") released the fourth quarter and 2019 annual operating performance data in the evening of January 13th. Data show that in 2019, the retail sales of Anta brand products (calculated at retail value) compared with the same period in 2018, recorded a growth in the middle of 10%-20%. Among them, the retail sales of FILA brand (calculated by retail value) compared with the same period in 2018 increased by 55%-60%.


According to the announcement, the retail sales of Anta brand products (calculated at retail value) in the fourth quarter of 2019 compared with the same period in 2018, recorded a high growth rate of 10%-20%. In the fourth quarter of 2019, the retail sales of FILA brand products (calculated by retail value) increased by 50%-55% compared with the same period in 2018. In the fourth quarter of 2019, the retail sales of other brand products (calculated at retail value) increased by 25%-30% compared with the same period in 2018.


In 2019, the retail sales of Anta brand products (calculated at retail value) compared with the same period in 2018, recorded a growth in the middle of 10%-20%. In 2019, the retail sales of FILA brand products (calculated by retail value) increased by 55%-60% compared with the same period in 2018. In 2019, the retail sales of other brand products (calculated at retail value) increased by 30-35% compared with the same period in 2018.


According to the data disclosed by Anta earlier, in the first half of 2019, FILA achieved operating income of 6 billion 538 million yuan, an increase of 79.9% over the previous year, accounting for 44.1% of total revenue, and 1788 stores in mainland China, Hongkong, China, Macao and Singapore, and 1652 at the end of 2018. Anta Group believes that the main reason for the growth of FILA is the rising market awareness of brands and products, the growth of physical stores, the improvement of store efficiency and the development of e-commerce.


According to public information, Anta sports is China's leading sporting goods company. Founded in 1994, Anta sports is mainly engaged in the design, development, manufacture and marketing of Anta sporting goods for many years. At present, the company aims to explore the potential of the mass market and high-end sporting goods market through diversified brand portfolios, including Anta and FILA.


Insiders said earlier that Anta sports revenues and profits recorded a high growth, showing strong brand power and product strength. Due to the acquisition of Amersports, the loss attributable to the parent company in fiscal year 2019 is not more than 650 million yuan, of which the related one-time cost of acquisition is not more than 200 million, and the amortization of acquisition price does not affect more than 500 million. Therefore, considering the impact of joint venture, the company's net profit growth in the 2019 fiscal year is not less than 30%.


Haitong Securities analyst Liang Xi believes that Anta sports net profit improvement and accelerated growth signal has a significant role in promoting the valuation. From the history of Anta sports, when the company cashed the main brand and same store improvement, the new brand rapid growth, the market has given a significant valuation premium. The success of retail oriented mode provides strong support for sustainable development. In 2013, Anta sports put forward the business mode from "wholesale business" to "retail oriented". The company's net profit in 2014 increased by 29.3% over the same period last year, increasing by 32.6pct compared with 2013. From this we can see that the adjustment of Anta's sports business mode will not only help them take the lead in going out of the industry downturn, but also lay a solid foundation for the future sustainable development.


Liang Xi said that FILA accelerated growth and strengthened Anta sports territory expansion ambition. FILA has significantly improved its revenue since its acquisition. In the four quarter of 2017, the growth rate of water in the fourth quarter of 2017 was above 80%. In the first half of 2018, the income of Fila in the first half of 2018 was 10 billion 550 million yuan, which accounted for 34% of the total revenue. Assuming that the proportion of the whole year was about 35%, it was estimated that the FILA income in 2018 would be about 8 billion 400 million yuan, up 80% over the same period (the growth rate was estimated from other retail sales in the 1-4 quarter of 2018), becoming an important achievement driver. On the basis of high base growth, FILAKids and FILAFusion are expected to be new drivers, and the overall growth rate of the brand is expected to remain above 40%. Observation shows that the success of FILA has proved that the company has the ability to cultivate overseas brand with a long history and develop high-end market, so as to provide an important reference for further deepening its international layout.


In Liang Xi's view, throughout the history of Anta's sports brand acquisition, it is mainly to gain the right of operation in the Greater China region of foreign brands, or to incorporate brand resources through joint ventures. The acquisition of AmerSports for global business is of great significance to the firm internationalization of AmerSports. We believe that the company has many specialized sports brands in the field of subdivision. We believe that the company has abundant resources of retailing and supply chain in the country, and the size of the synergy between the two sides will become the key to the success of the acquisition.


EuroMonitor data show that in 2009-2011 years, Anta sports actively explored the domestic market, and the market share increased from 7.2% to 9.5%. In 2011, the market share exceeded Lining for the first time, becoming the largest local sports enterprise in China. In the past 2011-2018 years, the market share of traditional strong brands such as Lining, XTEP and XTEP has dropped to varying degrees, from 8.2%, 6.3%, 6.8% in 2018 to 5%, 3.2% and 3.8% in 2018. In this stage, the market share of Anta sports is stable at 8.7%-10.6%, and the leading position is stable.


Liang Xi pointed out that in the past 28 years, Anta sports has achieved domestic and foreign market expansion, has won the first sports brand crown of China, and has formed differential competition with overseas leading companies, and Anta brand's long-term success has also been benefited from: first, based on the continuous development of the product price, the people's price has been further developed to sink the space of the channel; second, the close coordination and continuous innovation of R & D technology and design trend; third, the flat oriented supply chain management with retail oriented, superimposed on retailers to provide precise ordering guidelines;


CITIC Securities also believes that, looking forward to the future, Anta sports main brand is expected to maintain a relatively fast growth through the mid low price segment product enrichment and store structure improvement. In particular, the FILA brand is expected to achieve 30%+ growth in the future: 1) there is still room for opening up in the adult clothing market. In 2019, it is expected to continue to add dozens of new stores. At the same time, some inefficient stores (less than 500 thousand of monthly stores) are also greatly improved in space. 2) the branch brand takes root, and the high-end children's clothing in Kids leads / enjoys a continuous increase in industry dividends, and the Fusion tide brand enjoys consumption growth and growth. Among other brands, Descente has been gradually profitable after several years of cultivation, and the supply chain is steadily advancing domestically. In addition, Anta sports completed the acquisition of Amer, successfully completed the organization of the upper echelon carding, the future is expected to achieve by Amer: 1) quickly force small niche market; 2) the main brand to go up the stage, and ultimately achieve excellent to excellent leap.


As of press release, Anta sports reported HK $75.20 / share, down 2.46%, with a market value of HK $203 billion 200 million.