China Sportswear-CNY channel observations:SSSg likely solid

Anta: down jacket inventory still to be solved

    The down jacket has been a major issue affecting winter inventory digestion (refer to “China Sportswear - 4Q16 channel observations” published on January 8, 2017). Owing to Anta’s more aggressive down jacket inventory preparation during the 4Q16 sales fair, we estimate excessive down jacket inventory at Anta’s distributors. This may affect Anta distributors’ willingness to order in the upcoming 4Q17 sales fair.

    Valuation and risks

    We value the sporting goods space using discounted cash flow (DCF), as we expect investors to focus on the companies’ long-term growth potential. We support our valuation using PER valuation methodology. Downside risks to our positive industry view: weaker cyclical recovery, weaker innovation, sports segmentation, and e-commerce failing to drive growth for the sector.