Big Deal! To Optimize The Debt Structure, Anta Will Issue 12 Billion Medium-Term Notes

Anta Sports Products Co., Ltd. (hereinafter referred to as "Anta Sports") recently announced that the company received a notice from the China Association of interbank market dealers: the date is August 5, 2020, and the total amount of principal to be issued shall not exceed RMB 8 billion. (the same below) and the notice of acceptance of registration of interest bearing medium-term notes with a term of no more than 5 years; and a notice of acceptance of registration of the proposed issuance of interest bearing ultra short-term financing bills with a total principal amount of no more than 4 billion yuan and a term of no more than 270 days on August 5, 2020. According to the above notice date, the company can issue medium-term notes and ultra short-term financing bonds in installments within the two-year validity period.

Anta Sports said it would launch the issuance of medium-term notes and ultra short-term financing bills depending on market conditions, and the proceeds were intended to be used for more diversified financing channels, so as to optimize the company's debt structure.

According to public information, Anta started in Jinjiang, China's shoe capital, in 1991. Early Anta mainly engaged in OEM OEM business, forming a production-oriented business model. At the same time, Anta attaches great importance to the maintenance of brand image. In 1998, Anxi Shoes Co., Ltd. set up a good brand image of more than 30 million yuan in the market due to the quality problems.

Since 2015, Anta started the strategy of "single focus, multi brand and omni channel". On the online channel, Anta cooperated with tmall and vipshop platforms to open direct stores; Anta further managed offline stores, and the retail stores connected to ERP system increased from 43% in 2007 to 98%. Through the network system, Anta improved the supply chain management and got timely feedback from terminal stores. At the same time, Anta closed channels with low store efficiency and set up in better shopping malls Further layout stores to improve store efficiency.

At the same time, Anta has accelerated the acquisition of several brands and established joint ventures with foreign well-known brands to enrich the brand matrix and expand the coverage of product lines. The successful acquisition of amafin in March 2019 will accelerate the process of its internationalization. Anta has put forward three "one billion" plans, and the company will further base itself on the domestic market, explore and develop the foreign market.

According to the announcement, Anta Sports purchased yamafen at a premium of 40% in March 2019, with a capital injection of 1.543 billion euro. Of this, 700 million euro was paid by Anta's own cash, while the remaining 850 million euro was paid by the bank's 5-year loan with an interest rate of 2.3%. This acquisition has a great impact on Anta's short-term liquidity. Anta's current ratio decreased from 3.43 in 2017 to 1.95 in H1 in 2019, and the company's short-term solvency decreased significantly.

At the same time, Anta's asset liability ratio has been rising in recent years. In the first half of 2019, due to the debt impact of yamafen's acquisition, the asset liability ratio has increased from about 30% in previous years to 46.42%, the highest since listing. After the acquisition of the company, the total amount of loans will double.

Anta sports will issue 100.25% of the principal on January 13, 2020 to issue 1 billion euro zero interest guaranteed convertible bonds due in 2025. The main purpose of the bonds is to ease the financial pressure brought about by the acquisition of amafin in March 2019.

According to the financial report, Anta sports took the lead out of the industry adjustment period through the transformation of brand wholesale to brand retail, and its performance ushered in a strong rebound. Since 2014, the total operating revenue and net profit attributable to the parent company have maintained double-digit growth. In 2019, the company achieved revenue of 33.9 billion yuan, with a growth rate of 41%. The net profit attributable to the parent company and the parent company was 5.3 billion yuan, with an increase of 30%, and the performance was brilliant. Driven by the improvement of store efficiency of main brand stores and the successful large-scale cultivation of FILA, the revenue and net profit of returning to the mother are expected to maintain a rapid growth trend after the epidemic. Since 2012, the company's gross profit rate has increased steadily, from 38% to 55% in 2019, and the net profit rate has stabilized at 17% - 19%. The increase of gross profit rate is mainly due to the rapid increase of FILA brand revenue. Benefited from the high-end sports fashion positioning and direct marketing mode, the brand premium of FILA is high, and the gross profit margin is maintained at a high level of 70%. With the continuous increase of FILA's proportion, the overall gross profit margin is expected to continue to increase in the future.

In terms of categories, shoes and clothing provide the main income, clothing gross profit rate gradually increased, and the proportion of revenue continued to expand. The functionality of sports industry products is mainly reflected in sports shoes and clothing fabrics. Anta's revenue mainly comes from clothing and footwear, accounting for 96.7% of its revenue in 2019, of which clothing and footwear account for 63.1% / 33.6% respectively, and the gross profit margin is 57.8% / 50.5%. Since 2013, the gross profit rate of various categories has been increasing steadily. In 2015, the gross profit margin of clothing exceeded that of footwear, becoming the highest profit category;

From the point of view of main brands, FILA has a strong growth momentum. Anta sports continued to cover the whole consumer class through multi brand strategy. Benefiting from the refined channel management and product brand advantages, Anta sports's main brand grew steadily. In 2019, Anta Sports achieved revenue of 17.45 billion yuan, with an increase of 21.8%. FILA has successfully cultivated and developed rapidly. In 2019, its revenue is 14.77 billion yuan, with an increase of 73.94%, and the proportion is increased by 9 PCTs to 43.53%. The development momentum is strong, and it is expected to maintain a high-speed growth trend in the future. The gross profit rate of FILA is as high as 70%, which significantly improves the overall profit level. The layout of other brands has been steadily promoted, with an increase of 33.27% in 2019. With the steady development of main brands and the strong momentum of FILA, the revenue is expected to maintain a rapid growth trend, and the overall profit level will be better.

Guo Qinglong, an analyst at Huachuang securities, believes that Anta sports, with its clear and forward-looking strategy, grasps the key time point of the industry's development, and efficiently implements it, becoming the absolute leader of the domestic sports apparel industry, and its share price and valuation have continued to rise in recent years. The successful cultivation of FILA brand has given Anta great confidence. In order to fill the gap in the sports apparel market, lay out more blank and promising track segments such as ice and snow sports and outdoor sports, and promote the process of internationalization, Anta proposed the development strategy of "single focus, multi brand and whole channel" in 2016, and realized the full price band, all age groups and multi consumption scenarios by acquiring new brands The scale of the layout. In 2019, the company will enter the collaborative value year and establish the strategic theme of "collaborative incubation, value retail and internationalization". Anta sports is expected to achieve horizontal expansion of multi brands with the help of the successful experience of FILA in the future.

In addition, in terms of brand cultivation and building, Anta sports has excellent experience, selects international brands with complementary advantages and great development potential for cooperative cultivation. Relying on existing resources and experience, Anta sports is expected to usher in growth opportunities with the horizontal expansion mode of multi brands.