Textile And Apparel: Anta'S Robust FILA Has Been Growing For 19 Years With Good Results.

Event

Anta sports disclosed its annual report. In 2019, it achieved a revenue of 33 billion 928 million yuan /+40.8%, a net profit of 5 billion 344 million yuan /+30.3%, a diluted earnings per share of about 1.99 yuan, and a total dividend of 36 Hong Kong dollars per share.

Investment points

Anta robust, FILA high growth, 19 years of performance continued good trend: revenue side, 19 year revenue growth of 40.8%, of which Anta brand growth is steady, FILA brand continues high growth, channel epitaxy, endogenous and business growth all promote scale expansion. Net profit side, the company's net profit growth of 30.3%, profit growth is lower than the growth rate of revenue mainly from the acquisition of Amer share loss of about 630 million yuan. The company's net operating profit excluding Amer loss increased by 51.6%. The first is the rapid growth of FILA and Anta's scale. The two is that FILA maintains a relatively high gross margin level under the background of high growth. Three, some small brands have begun to make profits.

As for stores, as of 2019, the total number of stores was 12943, representing an increase of about 6.2% over the previous year. Among them, Anta stores 10516 /+4.6%, FILA stores 1951 /+18.1%, other brands total 476 /-0.6%. Compared to the company's revenue growth of nearly 41%, channel growth has helped to scale growth, but still mainly for endogenous and electricity providers to promote revenue growth.

In terms of brand sales, the main brand Anta grew at an average speed of about 10%~20% in 2019. The growth rate in the second half of this year has been improved. The FILA brand has continued to grow at 50%~55% in the second half of the year. R & D to promote Anta cost-effective products are welcomed by consumers, FILA high-end fashion sports positioning continues to be favored by consumers. Finally, in 2019, Anta, FILA and other brands accounted for about 51%, 44% and 5% respectively, with an increase of 22%, 74% and 33% respectively.

In terms of operating profit, the gross profit margin of Anta brand in 2019 was slightly increased from 42% to 41.3%, mainly due to the high cost performance products, which were welcomed by consumers. The net profit of the whole year increased by 26% to 4 billion 680 million yuan. FILA maintained a higher gross margin of nearly 70%, and the rapid growth of scale promoted the net profit increase of 87% to 4 billion 20 million yuan, accounting for 47% of the company's annual net operating profit. Sub brands have good performance, and the other brands in the second half have already made profits.

Operating net interest rate increased year by year, AMER losses affect the net interest rate: profitability, 2019 gross margin continued to rise from 2.4pct to 55%, mainly from the high gross margin FILA ratio increased. Direct battalion accounts for a relatively high proportion of FILA, pushing up the sales cost rate, scale growth and reducing management fees. The total cost of the company increased by 1.0pct to 33.3% during the total period, and the net operating interest rate increased by 1.8pct to 25.5%. Another acquisition of AmerSport in March was a loss of about 630 million yuan, and the related one-time cost of acquisition was not more than 200 million yuan, and the distribution price of the purchase price was not more than 500 million yuan. In the end, the net interest rate of the company was reduced by 0.97pct to 16.58%, and the profit growth rate was lower than that of the revenue growth.

The impact of the epidemic on domestic clothing consumption, industry integration is expected to be a good leader: the epidemic affects the performance of domestic consumer goods, the consumption growth rate slowed sharply in the first half of February, of which the retail sales of textile clothing above the limit dropped by about 31%. Recently, the health protection committee said that the current epidemic peak has passed, and the consumption intention has been restored. As far as Anta is concerned, the company has nearly 40% domestic stores resumed business in February 14th, and has strengthened the sales of e-commerce channels, and achieved some results. The company expects that the epidemic will affect industry and company performance in the first half of 2020, and it will return to normal level in the first half of the year. In 2018, the company occupied about 9% of the domestic sportswear market and third domestic sportswear. The company will respond to epidemic challenges with sufficient cash and is expected to gain greater market share in the process of industry consolidation.

Suggestion: sportswear is one of the best performing products in recent years. Anta is the third place of sports apparel in China. In 2019, the company's Anta and FILA brand promoted rapid growth in performance. In 2020, it is expected to expand its market share with the leading position. At present, the company's PE (2019A) is about 27 times, and it is recommended to pay attention to the recovery of sports apparel line and Anta's performance.

Risk warning: the impact of the epidemic on domestic and international periods or beyond expectations; consumers' expectations for mid long term economic growth or their willingness to consume.