ANTA Sports_ Investor Feedback on Stock Pullback

Summary of ANTA Sports Conference Call Company Overview - Company: ANTA Sports Products (2020.HK) - Industry: Asia Pacific Consumer Goods, specifically sports apparel and footwear Key Points Market Concerns - ANTA and FILA's Gross Profit Margin (GPM) decreased by 1.6 percentage points and 3.3 percentage points year-over-year in the second half of 2024 [3] - ANTA's operating expense (opex) ratio increased by 4.0 percentage points year-over-year in 2H24, while FILA's opex ratio remained flat [3] - GPM contraction attributed to: 1. Weak consumer demand, particularly in Q3, and a shift in traffic to online and factory outlets, resulting in increased discounts [3] 2. Exploration of new products leading to higher supply chain costs and lower Average Selling Price (ASP) [3] - ANTA's opex increase linked to new store formats (e.g., Superstores, Guanjun, Sneakerverse), advertising and promotion for the Olympics, and increased marketing for key products [3] Company Performance and Outlook - ANTA is recognized for delivering sustainable growth at the group level while effectively investing in individual brands [4] - Notable performance from Descente/Kolon with a 63% operating profit growth, contributing significantly to the group's earnings [4] - Expectations for 2025 include: - 11% sales growth - 8% operating profit growth - 10% adjusted net profit growth - Strong contributions anticipated from Descente, Kolon, and Amer [5] - Group's sales growth for Q1 2025 (up to mid-March) tracking around mid-teens percentage, which is impressive given its revenue size ranking 4 globally, just below Lululemon [5] Valuation - ANTA currently trades at 17x estimated 2025 P/E, 14x excluding its Amer stake, and 11x when excluding cash [6] - The multi-brand operation and M&A capabilities are expected to drive sustainable growth, leading to an "Overweight" rating [6] Market Reactions - Recent market disappointments and concerns regarding GPM and opex ratios have led to profit-taking after ANTA's stock rose 34% this year [10] - Adverse macroeconomic headlines contributed to a ~5% decline in HSCEI over the past three trading days, with ANTA down ~10% [10] Risks - Upside Risks: - Stronger economic growth - Continued growth momentum for FILA - Successful reengineering of the ANTA brand - Rapid growth of other brands like Descente, Kolon, Arc'teryx, and Salomon [14] - Downside Risks: - Weak sales and earnings growth in 1H24 - Ongoing macroeconomic weakness - Unfavorable shifts in fashion trends - Potential cannibalization within the brand portfolio - Stock volatility of Amer Sports [14] Conclusion - ANTA Sports is navigating through challenges with a focus on sustainable growth and brand investment, while facing market pressures and macroeconomic uncertainties. The outlook for 2025 remains positive, supported by strong brand contributions and strategic initiatives.