Anta Earnings: Double-Digit Sales Growth Despite Macroeconomic Slowdown

We maintain our fair value estimate for Anta 02020 following its report of in-line third-quarter sales. Management kept its 2023 guidance, which is comparable with our forecast. We continue to view Anta shares as undervalued, trading at a 35% discount to our fair value estimate of HKD 141.

In the third quarter, Anta Group recorded about a 12% year-over-year growth in retail sales. By brands, the namesake Anta brand grew about 8%, while Fila grew by about 12%. The remaining premium outdoor brands again delivered more than 45% growth. Despite some slowdown in growth during the third quarter, management highlighted improving inventory levels (compared with last year) and stable product pricing.

Although management maintained full-year guidance for 2023, it indicated that there are risks of its core Anta brand missing the double-digit revenue growth target. But looking beyond near-term challenges, Anta’s long-term outlook remains very attractive, in our opinion. Chinese per capita sportswear spending is still a fraction of most developed countries’, and rising health awareness should continue to drive overall activewear sales. We believe Anta’s multibrand portfolio, which covers consumer segments from mass market to premium, will allow the company to capture a rising share of the booming sportswear market. Our Anta model calls for a compounded annual revenue growth of 13% over the next five years, driven primarily by an increasing market share of Anta, alongside geographic expansions of Descente and Kolon Sport. Over the same period, we also expect the group operating margins to improve to around 26% by 2027, from 21% in 2022 and 26% in 2019, driven by operating leverage. Coupled with growing joint-venture income from Amer Sports, we expect Anta to deliver compounded annual EPS growth in the low twenties.