Maintain BUY and reiterated our TP of HK$ 101.84, based on 32x FY21E P/E (unchanged). The 3Q numbers may just be in-line but the underlying fundamentals (stellar 10-1 performance, robust online even after offline re-opened, better weather, etc.), in our view, are encouraging. Therefore we are confident for an astonishing turnaround in 4Q20E and 1H21E and see the current valuation of 27x FY21E P/E attractive, vs Li Ning/ Nike/ Adidas’s 38x/ 35x/ 32x.
- 3Q20 retail sales growth were roughly in-line. Anta/ FILA/ other brands’ retail sales growth were LSD/ 20-25%/ 50-55% in 3Q20, roughly in-line with CMBI est. of 5%/ 20% for Anta/ FILA, meaningful improved vs -ve LSD/ +ve MSD in 2Q20. The acceleration, in our view, was primarily driven by the faster e-commerce growth (50%+/ 90%+ for Anta/ FILA), as both active users and purchasing frequency had gone up after the pandemic.
- But 10-1 golden week was remarkable and better than expected. Management also highlighted sales growth for Anta/ FILA during the national holidays were 40%+/ 50%+. Other than the favorable factors such as: 1) a colder and earlier winter and 2) an extended holidays thanks to the mid-autumn festival, 3) the thoroughly prepared sales and marketing campaign by Anta/ FILA team was also a main driver. Management also become more confident on 4Q20E, as both the traffic and sentiment are returning healthily..
- Inventory remained excessive as at 3Q20 but it was a preparation for 10-1 golden week. Inventory to sales ratio for Anta/ FILA were still higher than normal at 6/ 8 months in 3Q20 (vs normal level of 4-5/ 6-7months). But the management stated that was reasonable to stock more before the long national day holidays and have reaffirmed their target of reducing the whole channel inventory to a “lower than FY19’s level” by FY20E.
- Amer performance in 3Q20 was better than expected. Amer’s sales was still falling YoY in 3Q20, but the decline had narrowed to less than 15% , comparing to ~20% drop in 1H20. Moreover, management is optimistic on at least a breakeven in 2H20E, thanks to the robust online, direct retail, and China growth (20%+), plus the effective costs saving measures implemented.
- Maintain BUY and reiterated our TP of HK$ 101.84. We maintained BUY and reiterated our TP of HK$ 101.84, based on 32x FY21E P/E (unchanged). We believe the valuation is justifiable at 27x FY21E P/E, given a 22% NP CAGR during FY19-22E.
