Anta (HK:02020)

4.46
13 ratings
SP

Anta Sports is the largest Chinese sportswear company, engaging in the design, manufacturing, and marketing of sportswear. Brands under Anta’s management include the Anta core brand, Fila, Descente, Sprandi, Kolon, and KingKow. As of the end of 2020, the company had 10,983 stores in China, of which 9,467 were Anta stores and 1,086 were Fila stores.


Anta’s reported first-quarter sales figures that were in line with our estimate on an annualized basis, and we maintain our HKD 55 per share fair value estimate for

the firm. Anta's share price has reacted positively to the news, with shares of the company now trading in the threestar territory. We recommend investors wait for a wider

margin of safety before investing in Anta.


During the first three months, Anta’s core brands, Anta Adults and Kids, recorded sales growth of about 12%, compared with the same period last year. From a growth

perspective this is a less exciting segment because it tends to perform in line with sportswear sales in China. On the other hand, the majority of Anta’s market share gains are from other brands, which delivered a 67% rise in sales during the first quarter. Fila is, again, the center of our attention. Its performance was driven by its Kids’ product

lines and online orders. Strong sales numbers are confirmed by the Baidu Index, a free massive data analysis service based on Baidu web search and Baidu news, which

recorded about 50% to 60% in search frequency for the term “Fila” during the first quarter. Digging deeper into the search engine data, we see the growth in searches for Fila in the Chinese language are much stronger than that in English, suggesting rising localization of the brand image. However, we continue to see slowdowns in Fila’s growth over the next few years given the logo-emblazoned brand is highly exposed to shifts in fashion trends.


In addition to brief updates about its retail sales performance, Anta is set to incorporate, but not consolidate Amer’s results into its own profit and loss statement starting

in the second quarter. We are not fond of such accounting because it means Amer’s financial performance will remain opaque for the initial years following the acquisition. While little new information has been made public about how Anta will position and market Amer brands in China, we would not be surprised if the firm follows its Fila model of marketing using celebrities and Internet influencers.


At the heart of our valuation system is a detailed projection of a company's future cash flows, resulting from our analysts' research. Analysts create custom industry and

company assumptions to feed income statement, balance sheet, and capital investment assumptions into our globally standardized, proprietary discounted cash flow, or DCF,

modeling templates. We use scenario analysis, in-depth competitive advantage analysis, and a variety of other analytical tools to augment this process. We believe this

bottom-up, long-term, fundamentally based approach allows our analysts to focus on long-term business drivers, which have the greatest valuation impact, rather than shortterm market noise.


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