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On Thursday, Bernstein SocGen Group resumed coverage on ANTA Sports Products Ltd. (2020:HK) (OTC: ANPDF), assigning a Market Perform rating to the company’s stock. Accompanying the rating, the firm set a price target of HK$90.00. According to InvestingPro data, ANTA Sports demonstrates strong financial health with impressive gross margins of 63% and revenue growth of 16% over the last twelve months. The reinstatement of coverage comes with an analysis of the company’s strengths and challenges, as communicated by the research firm.
The report from Bernstein highlighted ANTA Sports’ robust portfolio, which includes a mix of both local and international sportswear brands. InvestingPro analysis reveals the company as a prominent player in the Textiles, Apparel & Luxury Goods industry, with strong cash flows and a 17-year track record of consistent dividend payments. The firm pointed out that the core brands, Anta and Fila, which account for approximately 85% of the company’s revenue, are currently facing growth headwinds. These two brands are critical to the stock’s performance, according to Bernstein’s analysis.
Bernstein also noted that while ANTA Sports owns high-growth niche brands like Kolon and Descente, these brands do not have significant scale. Additionally, the company’s roughly 40% ownership in Amer Sports contributes more to below-the-line metrics rather than top-line growth. This detail was emphasized as a factor in evaluating ANTA Sports’ overall financial health.
The report further mentioned that the potential for margin gains through operational efficiencies, such as improvements in wholesale discounts and direct-to-consumer (DTC) operations, remains to be proven. Bernstein suggests that these aspects are "show-me," indicating that investors will need to see tangible results before assigning value to these initiatives.
In conclusion, Bernstein’s analysis suggests that ANTA Sports’ current valuation seems to already account for the strengths of its diverse portfolio. However, InvestingPro analysis indicates the stock may be undervalued, with a PEG ratio of 0.37 suggesting attractive growth potential relative to its current price. For investors specifically interested in premium outdoor sportswear, the firm hinted at the possibility of considering a direct investment in Amer Sports for a more focused exposure to the outdoor segment. Subscribers to InvestingPro can access 8 additional key insights about ANTA Sports’ financial health and growth prospects.
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