Morningstar | Anta's Q1 Sales Growth In Line with Our Expectations; Shares Are Now Fairly Valued
Narrow-moat 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 three-star territory. We recommend investors wait for a wider margin of safety before investing in AntaDuring the first three months of 2019, Anta’s core brands, Anta Adults and Kids, recorded sales growth of about 12%, compared with the same period in 2018. 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 of 2019. 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 of 2019. 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.
ANTA Sports Products is principally engaged in the manufacturing, trading and distribution of sporting goods, including footwear, apparel and accessories, in the People's Republic of China. As of Dec 31 2014, there were 7,662 ANTA Stores, 1,228 Kids sportswear series stores and 519 FILA stores in China, Hong Kong and Macao.
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