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ANTA Sports Products Ltd (SEHK: 2020) is a leading Chinese sportswear brand established in 1991. The company is a Hong Kong-listed and principally sells footwear, sports apparel, and accessories products to the high end and the mass market. Its business ethos is “Single Focus, Multi Brand, Omni Channel”.
The company’s share price has easily outperformed the Hong Kong benchmark due to outstanding sales from its retail operations, an early government grant and a steady level of operating expenses.
Its share price has risen by an impressive 195% since August 2016 – outperforming the Hang Seng Index’s return of 12.2% over the same period.
However, this does not tell the whole story. The fundamentals point to a strong business but it’s also important to explore alternative growth indicators outside pure financial metrics. Let’s take a look at two of these potential growth factors for ANTA.
Organic growth refers to the growth rate a company can achieve by increasing its output and sales through existing capabilities. ANTA has used multiples strategies to achieve growth given the favorable Chinese government policies including the “Action Plan to Stimulate Sports Consumption (2019-2020)”.
These are geared towards promoting the development of consumer-oriented fitness and the broader sports industry. ANTA is capitalising on this in two key ways.
1. Brand enhancement and awareness
ANTA’s multi-brand strategy, which fully covers consumer demand for sportswear in China’s RMB 280.8 billion sports and fitness clothing market by 2020. With its comprehensive distribution network of physical stores within China, together with online channels (such as partnering with the e-commerce giants), the ANTA brand is now much more in the public consciousness.
Being a leading sportswear brand, ANTA has been chosen to prepare apparel for the Beijing 2022 Olympic and Paralympic Winter Games. These corporate activities significantly raise ANTA’s profile and will gradually translate into the growth of performance of the company in medium term.
2. Cost-saving strategies
ANTA announced it was to be the first Chinese company to join the Better Cotton Initiative (BCI), a membership-based non-profit organisation based in Switzerland that aims to make cotton production better for makers and is an advocate for sustainable growth in the sector.
Through this global platform, ANTA will be able to secure its cotton materials for products it launches in 2020 at a lower cost, thus significantly lowering its R&D and production costs.
For external growth, ANTA acquired Finnish sporting goods company Amer Sports in the first quarter of this year. The purchase adds world-famous brands such as Wilson, Atomic, and Salomon.
This lateral acquisition of sports gear brands will expand ANTA’s know-how in the sports equipment sector and increase the group’s sales channels around the world – helping it to expand beyond just sports apparel.
ANTA has previously faced accusations from research firm Muddy Waters, which cited false profit projections, but these have been successfully rebuffed given ANTA’s strong share price performance since 2016.
Given ANTA’s popularity – amply reflected in 2018’s Singles Day shopping festival in China – and its consistency in meeting investors’ expectations, there should be room for ANTA’s share price to continue to grow in the near future.
Even after its recent run-up, the stock still has a reasonable price-to-earnings ratio despite outperforming industry peers. I believe ANTA is a solid investment opportunity over the medium term from a value perspective.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor M.Wu doesn’t own shares in any companies mentioned.