Anta: Investor Day Offered Upbeat Medium-Term Guidance; Shares Undervalued

We maintain our HKD 141 fair value estimate for narrow-moat-rated Anta 02020 after its 2023 investor day reinforced our positive long-term thesis. Anta offered upbeat financial targets for the next three years, including midteens annual revenue growth which is slightly ahead of our forecasts. The firm expects its Fila business to grow at double digits annually, which we are skeptical about, but the focus on expanding the brand’s addressable market is positive.

Management also reiterated its plan to improve long-term margins for Anta but stopped short of providing a near-term outlook of profitability following the recent signing of Kyrie Irving. We continue to see shares as undervalued for long-term investors. We believe the market is underappreciating the group’s opportunity within the premium outdoor segments, where we expect higher growth over the next three years and which should drive up share price performance.

At the outset of the presentation, management emphasized the growing trend among consumers to opt for high-end aspirational products while seeking savings on everyday commoditized items, resulting in an increasing polarization of spending. In response to this shifting consumer demand and to drive sales growth, Anta has updated its strategies for each of its four main brands.

For its namesake Anta brand, the goal is to solidify its mass-market position, providing more functional value without raising prices. We find this to be a sensible approach and anticipate that the brand will capture a larger market share in the coming years.

Regarding Fila, the emphasis remains on targeting China’s mid-to-high-end consumers. However, driving incremental sales may prove more challenging, as the brand now needs to expand into the performance category while simultaneously defending its market share in sports fashion.