Enterprise Information: Anta Accelerates Multi Brand Comprehensive Integration

Zheng He, the former CEO of the group, resigned recently. We believe that through the smooth turnover of Amer management, Anta accelerates the comprehensive integration of multi brands, strengthens the executive efficiency and promotes the growth of multi brands. Meanwhile, the company's terminal retail sales improved steadily from August to September. Although DTC's transformation attempts to drag down the performance and increase the business fluctuation in the short term, it is optimistic that the company can realize the smooth integration by virtue of its absolute leading comprehensive competitiveness and rich direct marketing experience, and stimulate the vitality and space of multi brand cooperation. Market divergence has brought about adjustment, and the current valuation is attractive (corresponding to PE 24 times in 2021), maintaining the "buy" rating.

Event review: Amer group announced on September 19 that Heikki takala, the former CEO of the company, resigned from the position of president and CEO of the group and transferred to the special adviser of the board of directors. At the same time, Zheng Jie, the executive director, took over the CEO of the group, and created two new positions: COO (chief operating officer) and CSO (Chief Strategic Officer), with Michael Hauge Sorensen as the COO. The new management of Amer has a strong background and rich experience in the consumption and investment industry. Zheng Jie once worked in Adidas and joined Anta Group in 2008 as executive director, President and CEO of outdoor business unit; Michael Hauge Sorensen worked for firstads, a global well-known tooling group, and EQT, a well-known investment institution; and a new CSO worked at BCG, specializing in M & A and business integration. In addition, other management levels are basically retained and no new changes are expected in the short term.

Our view: comprehensively promote Amer business integration, strengthen executive efficiency and promote multi brand growth. We believe that the main reasons for the change of Amer's management are as follows: 1) the management strategy of the former European management is relatively conservative, and the enthusiasm for brand investment is insufficient. ② To improve the operation efficiency of Amer's brands, strengthen the coordination of various brands, improve the investment efficiency and strengthen the cost saving. At present, most of the brands in the supply chain procurement and channel negotiation are connected by each brand team, and there is no synergy effect. ③ Repositioning the management intelligence of the headquarters, from reporting to the board of directors to actively managing and empowering the brand, is expected to take on more responsibilities in line with the brand planning and strategy at the group level in the future, and improve the efficiency of process flow and communication.

Business tracking and full year Outlook: 2020h2 domestic business returns to positive growth, Amer turns loss to profit. Combined with the recent tracking, we expect Anta brand's operation from July to September to improve compared with Q2 (overall flat, slightly increased, online 40% + growth), and FILA's revenue in August will increase by 20% +. It is estimated that 2h20 Anta brand will grow by 5% ~ 10%, FILA will increase by 20% ~ 30%, and inventory is expected to return to normal level by the end of the year. In terms of overseas business, Amer stores reopening and active fee control policies are expected to achieve good results in the second half of the year. It is expected to turn losses into profits in the second half of the year, thus reducing the losses of the whole year.

DTC update: the integration of the first batch of wholesalers started steadily, accelerating the transformation of comprehensive retail. Since September, the company has started the transformation of some wholesalers DTC. We believe that in the short term, considering the weak profitability of distributors under the influence of health events, it is expected that DTC will drag down the revenue / net profit of 2020 (consolidated statement - 1 billion revenue / - 200-300 million net profit), and increase business fluctuation. However, in the long run, the company has tried to straighten out the internal mechanism and promote the comprehensive direct retail transformation of its brands, which is expected to better integrate channel resources, strengthen terminal interaction with consumers, and finally promote the full blossom of multi brand group strategy.

Risk factors: the uncertainty of Amer integration; the progress of health events exceeded expectations; the effect of DTC integration was less than expected.

Investment suggestion: the management of Amer should be changed smoothly and the comprehensive integration of multi brands should be accelerated. Meanwhile, retail sales continued to pick up from August to September. Although DTC's transformation attempts to drag down the performance and increase the business fluctuation in the short term, it is optimistic that the company will realize the smooth integration of distributors and stimulate the vitality of multi brand cooperation by virtue of its absolute leading comprehensive competitiveness and rich experience in direct marketing management. The EPS forecast for 2020 / 2021 / 2022 is 1.94/2.92/3.52 yuan. The current stock price corresponds to 24 times of PE in 2021 and maintains the "buy" rating.