2020: Share Repurchases Will Drive Confidence Despite Conviction List Removal

Analysts have slightly reduced their price target on ANTA Sports Products to reflect a modest reduction in fair value and earnings multiple assumptions, following its removal from a key regional conviction list. This adjustment results in an approximate CNY 0.33 decrease in their modeled fair value per share.

Analyst Commentary

Analyst sentiment on ANTA Sports Products has turned more balanced, with the recent removal from a major regional conviction list signaling reduced confidence in near term outperformance rather than a fundamental break in the investment case.

While the core franchise remains intact, the updated stance reflects a more nuanced view on valuation support, execution visibility, and the trajectory of earnings growth.

Bullish Takeaways

• Bullish analysts highlight that the core ANTA brand and premium sub labels continue to benefit from strong brand equity and differentiated positioning in the domestic sportswear market. They view this as supportive of medium term revenue growth.
• They view the recent moderation in expectations as creating a more reasonable valuation entry point. The trimmed fair value is still seen as implying potential upside if the company executes on product innovation and retail efficiency initiatives.
• Ongoing expansion in higher margin categories, including performance sportswear and athleisure, is seen as a key driver for gradual margin improvement, supporting a credible earnings compounder profile.
• Balance sheet strength and robust cash generation are cited as buffers that allow continued investment in marketing, digital channels, and store optimization without materially compromising returns on capital.

Bearish Takeaways

• Bearish analysts point to increased execution risk around premiumization and brand portfolio management. They note that any missteps in product cycles or inventory control could pressure margins and weigh on valuation multiples.
• They are cautious on the pace of demand normalization in key domestic channels, with heightened competition and promotional intensity seen as potential headwinds to sustaining prior growth rates.
• The removal from the conviction list is interpreted as recognition that upside catalysts in the next 6 to 12 months are less visible. This is viewed as limiting the near term re rating potential even if fundamentals remain broadly solid.
• There is concern that consensus earnings expectations, while adjusted modestly lower, may still be vulnerable if macro conditions soften further or if international expansion fails to scale as quickly as modeled.

What's in the News

• Exploring a potential takeover of German sportswear brand Puma, with discussions reportedly including a possible partnership with private equity and competition from other Asian sportswear groups (Bloomberg/Reuters report)
• Global fashion push through the ANTAZERO X Kris Van Assche sustainable performance collection, launched at Dover Street Market Paris to position ANTA within the global fashion elite and bridge sport and high fashion
• Emphasis on sustainable materials, including recycled nylon and mycelium based vegan leather, across outerwear, knitwear, and athleisure pieces in the ANTAZERO X KVA FW25 collection
• Execution of a sizeable share repurchase program authorized to buy back up to 10% of issued share capital, aimed at enhancing net asset value and earnings per share

Valuation Changes

• Fair Value: reduced slightly from CNY 114.20 to CNY 113.86 per share, reflecting a modest trim in the intrinsic value estimate.
• Discount Rate: increased marginally from 9.30% to 9.34%, implying a slightly higher required return and modestly lower valuation support.
• Revenue Growth: kept effectively unchanged, edging up only fractionally from 9.97% to 9.97%, indicating stable top line growth expectations.
• Net Profit Margin: eased slightly from 18.21% to 18.20%, signaling a minimal downgrade to medium term profitability assumptions.
• Future P/E: lowered modestly from 20.60x to 20.47x, reflecting a small compression in the targeted earnings multiple applied to forward earnings.