Anta brand retail sales recorded a negative mid-single-digit / positive mid-single-digit YoY change in 2Q22/1H22, which is within management’s expectations. It achieved an over 30% retail sales growth in both 2Q22 and 1H22 when compared with 2020. Jun 22, the retail sales started to recover at double-digit YoY growth. ASP had a mid to high single-digit YoY growth due to the increase in raw material costs, an increase in high-end product contributions, and stable retail discounts. The inventory to sales ratio is slightly higher than 5x due to the pandemic, but still within an acceptable range. The company guided that it will increase the proportion of Anta brand stores in Tier 1 & 2 cities to 30% from 20% before the pandemic. It will also open more stores in shopping malls.
FILA retail sales recorded a high-single digit / low-single digit YoY decline in 2Q22/1H22: Compared to other main international competitors’ 20-30% YoY sales drop in 2Q22, Fila achieved a better performance. Its retail sales saw a 50% growth compared with 1H20. In Jun 22, it achieved a double digit yoy recovery. Fila brand’s sales ranked third during 618 shopping festival in Tmall
All other brands segment (inclusive of Kolon, Descente, Amer) achieved a 20-25% / 30-35% YoY growth in 2Q22/1H22 respectively. Outlook. The company believes the worst has passed in 1H22 and is able to control the operating expenses such as via renegotiation for rent reductions. If external environment returns to normal in 2H22, Anta expects a reversion to its 18-25% CAGR target in terms of sell-through.
OUR VIEW
Valuation/Recommendation. Although the company mentioned that despite lower consumer confidence, Anta still sees a double-digit yoy sales growth in Jun 22 on the back of the high base in the same period in 2021. We reiterate that the pent-up demand for leading domestic sportswear brands' products would steadily release as long as the pandemic eases. Anta trades at a reasonable 27x 2022F PE vs est. 25% EPS growth between 2022 and 2025.