To Keep Reading
If you’ve ever thought of buying a pair of sports shoes or a sports top, you may have come across the Chinese sports apparel and shoe company ANTA Sports Products Ltd (SEHK: 2020).
The group was established in 1991 and is principally engaged in the design, development, manufacturing and marketing of sporting products such as footwear, accessories and apparel. ANTA has expanded its brand portfolio beyond its signature ANTA brand to include other well-known brands such as FILA, DESCENTE and KINGKOW.
This sports giant has been dominating the Chinese market for sporting goods and apparel and has demonstrated strong, consistent growth over many years. With a rising middle-income class along with healthier lifestyles being promoted on social media and advertisements, companies such as ANTA will continue to witness strong demand for its products.
It clearly has a commanding market position. So, here are three aspects I like about ANTA Sports.
1. Rising revenue and net profit numbers
Source: ANTA Sports Annual Report 2018
ANTA has grown its revenue and net profit impressively over the last five years. Revenue has nearly tripled from RMB 8.9 billion (US$1.27 billion) to RMB 24.1 billion over five years, while net profit has more than doubled from RMB 1.7 billion to RMB 4.1 billion.
The steady and consistent growth is a testament to ANTA’s brand strength and presence in its key markets. The compound annual growth rate (CAGR) for its revenue is 28.2% over four years, while for net profit, the CAGR was 24.6%.
2. Strengthening gross profit margins
Gross profit margin is an indication of how much pricing power a company has, and the higher its gross margin, the stronger the company’s competitive moat. ANTA has grown its gross margin from 45.1% in 2014 to 52.6% in 2018, an increase of 7.5 percentage points.
This is extremely impressive considering there are many competitors out in the market selling similar types of sporting apparel and footwear and demonstrates the strong brand equity that the company possesses. For H1 2019 interim results, gross margin increased even further to 56.1%.
3. Growth in all product categories
Source: ANTA Sports H1 2019 Earnings
ANTA has three major product categories: footwear, apparel, and accessories. From the table above, apparel takes up the bulk of revenue, making up close to 62% for H1 2019, while footwear is the next largest segment at around 34.6% of total revenue.
It witnessed strong growth in revenue for all divisions, with the strongest growth of nearly 51% year-on-year coming from its Apparel division. Revenue for this division soared from RMB 6.1 billion to RMB 9.2 billion.
Optimistic on continued growth
ANTA Sports has been reporting stronger year-on-year numbers for the last five years and the group’s growth trajectory is solid. With higher gross margins and double-digit growth across all their product segments, I am optimistic that investors should witness even better numbers from the group in the future.
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 Royston Yang doesn’t own shares in any companies mentioned.