With the rise of the Chinese economy and the cultural self-confidence of Generation Z in China, the wind of Guochao (Chinese fad) is getting stronger and stronger.
On the evening of June 25, the Chinese brand Li-Ning released a beautiful performance report. Li-Ning expects that the net profit in the first half of this year will not be less than 1.8 billion yuan (RMB, the same below), compared with 683 million yuan in the same period last year. Anta previously estimated that it will not consider the Amer joint venture. Under the influence, the company’s net profit in the first half of the year will achieve a growth of over 65%, about 2.38 billion yuan.
Li-Ning, Xtep, Anta and other Chinese sports brands have just caught up with the Guochao style and renewed their new opportunities. These sports brands took advantage of “Guochao” to tear off the label of “earth flavor”, becoming more and more popular among young Chinese, and their sales performance has also soared.
In the secondary market, Chinese sports brands are even more enthusiastically sought after by capital, and their share prices have repeatedly set record highs, easily crushing A-share liquor brands. Since March, Anta Sports has risen by 52%, Li-Ning has risen by 90%, and Xtep International has soared by 264%. The latest market values are HK$486.3 billion, HK$206 billion and HK$34.9 billion respectively.
Since the start of this round of upward trend on March 20, 2020, Xtep International has risen by 566%, Li-Ning has risen by 391%, Antai Sports has risen by 297%, and the market value has increased by 29.5 billion Hong Kong dollars, 164.3 billion Hong Kong dollars and 362.6 billion Hong Kong dollars respectively, a total increase of 556.4 billion Hong Kong dollars (approximately 462.5 billion yuan)
Performance of Chinese sports brands soars, Li-Ning’s net profit in the first half was not less than 1.8 billion yuan
As the Guochao wind is getting stronger and stronger in China, the performance of Chinese sports brands has skyrocketed.
On the evening of June 25, Li-Ning released a performance forecast on the Hong Kong Stock Exchange. It is expected that the net profit in the first half of this year will be no less than 1.8 billion yuan, compared with 683 million yuan in the same period last year. This means that Li-Ning’s performance growth in the first half of the year will exceed 163%. Li-Ning said that the improvement in group performance was mainly due to revenue growth of more than 60% and continuous improvement in operating profit margins.
The annual report disclosed in March of this year showed that in 2020, Li-Ning’s operating income was 14.457 billion yuan, an increase of about 4.2% year-on-year; on a comparative basis, the net profit was 1.698 billion yuan, an increase of 34.2% year-on-year. E-commerce channels have become a new growth point for Li-Ning, and the proportion of revenue has gradually increased. In 2020, the proportion of Li-Ning’s e-commerce channel sales has increased to 28%.
Anta Sports’ performance has also grown rapidly. On June 17, Anta Sports announced its performance forecast for the first half of 2021 on the Hong Kong Stock Exchange. Regardless of the impact of the Amer joint venture, the company’s net profit for the first half of the year will increase by no less than 65% to approximately 2.38 billion yuan. Anta said that in mid-2020, the impact of the pandemic on the retail market in mainland China has been relatively significantly reduced, and the revenue of Anta, FILA and other brands has recorded a strong rebound compared with mid-2020.
It is worth noting that according to the previously disclosed annual report, Anta’s net profit in 2020 was 5.162 billion yuan, surpassing Adidas’ net profit of 429 million euros (equivalent to approximately 3.315 billion yuan). This is also the first time that Anta’s net profit has surpassed Adidas.
As of now, Hong Kong stocks Xtep International has not disclosed the performance forecast for the first half of this year, but the previously disclosed operating data for the first quarter is also quite eye-catching. In the first quarter, Xtep International’s main brand Xtep’s retail sales increased year-on-year (including online and offline channels). About 55%, the retail discount level is 30% to 25%, and the turnover of retail inventory is about four and a half months. Compared with the same period last year, the business performance of the Xtep brand in the first quarter of this year has been greatly improved.
Stock prices skyrocket, well-known investment banks enter the game
What is more eye-catching than sales performance is the stock price performance of the aforementioned Chinese sports brands. Since last year, the Hong Kong stocks of these companies have been enthusiastically sought after by the capital market, and their share prices have easily crushed the A-share liquor brands.
Especially since March of this year, the stock prices of Anta Sports, Xtep International, and Li-Ning have accelerated their rise, reaching new highs repeatedly. Since March, Anta Sports has risen by 52%, Li-Ning has risen by 90%, and Xtep International has soared by 264%. The latest market values are HK$486.3 billion, HK$206 billion and HK$34.9 billion respectively.
In fact, since the launch of the current round of market rises on March 20, 2020, Xtep International has risen by 566%, Li-Ning has risen by 391%, Antai Sports has risen by 297%, and the market value has increased by 29.5 billion Hong Kong dollars, 164.3 billion Hong Kong dollars, 362.6 billion Hong Kong dollars, respectively. Hong Kong dollar.
It is worth noting that the recent accelerated rise in Xtep International’s share price is related to the entry of the well-known investment bank Hillhouse.
On June 15, Xtep International issued an announcement on the Hong Kong Stock Exchange that Hillhouse subscribed for Xtep International’s 500 million Hong Kong dollar convertible bonds and at the same time subscribed for Xtep’s subsidiary Xtep Global Investments (with the operating rights and ownership rights of K-SWISS and Palladium) for $65 million (about 506 million Hong Kong dollars) convertible bonds, and establish strategic partnerships. Hillhouse has invested approximately HK$1 billion in Xtep International and its subsidiaries.
In 2020, Xtep International’s annual revenue was 8.172 billion yuan, a year-on-year decrease of 0.1%. However, the fashion sports series represented by the two major brands of K-SWISS and Palladium saw annual revenue of nearly 1 billion yuan in 2020, a year-on-year increase of 114.4%. The income of the fashion sports segment represented by K-SWISS and Palladium accounted for 12.2% of Xtep’s annual income, while this segment accounted for only 5.7% in 2019.
Essence International believes that Xtep International has ample cash on its books, so Hillhouse’s most important thing for the company is not financial support, but help in respect of channel resources and industry experience. Tianfeng Securities believes that the introduction of Hillhouse Group will enhance the competitiveness and profitability of the two brands, and hopefully release the potential of the two brands in the fast-growing sportswear market in China.
On the day of gaining Hillhouse’s entry (June 15), Xtep International’s share price opened nearly 15% higher, and at its peak it rose more than 30%, setting a record high. As of the day’s close, it rose by 20.72%. In the following days, Xtep International’s stock price continued to rise sharply, setting a record high for several consecutive days. Since June 15, Xtep International has gained nearly 50%.
Institutions are optimistic about high-quality Chinese brand apparel companies
A new “Guochao” era is coming in China.
According to the “2021 Guochao Search Big Data Report” jointly released by Baidu and People’s Daily Online, Guochao’s attention has increased by 528% in the past ten years. In 2021, the attention of Chinese brands has reached three times that of foreign brands. As for Guochao-related content, 74.4% of followed users came from post-90s and post-00s. Li Jiaqi, a well-known e-commerce anchor, lamented: “A group of generation Z young people in China who know how to buy, coupled with new and good companies, have created a new trend and new Chinese products.”
According to data disclosed by a Chinese e-commerce platform a few days ago, in the top ten consumer brand search hotspots, Chinese brands occupy 7 seats; during the 618 promotion period, Guochao products were promoted to the leading position for the first time.
In May of this year, the “Baidu 2021 Guochao Pride Search Big Data” report jointly issued by Baidu and People’s Daily Online showed that Guochao’s attention has increased by 528% in the past ten years, and now Guochao has entered the 3.0 era. Guochao in the new era is not limited to new domestic products, but also includes the full rise of Chinese forces behind culture, technology and other fields.
Data show that in 2021, the attention of Chinese brands will reach three times that of foreign brands. Among Guochao-related content, 74.4% of the following users are from post-90s and post-00s.
According to a research report by Zhongtai Securities, Chinese consumers are showing high enthusiasm for Chinese brands during the resumption of 618 this year. Among them, Chinese sports brands Li-Ning, DESCENTE, Fila, Anta, and Xtep have increased by 164%, 150%, and 69 year-on-year respectively. %, 59%, 41%, while overseas brands Adidas, Nike, Puma fell 32%/26%/14% year-on-year respectively.
On the Chinese e-commerce platform JD.com, from June 1st to June 18th, the turnover of Chinese sports brands increased by more than 100% year-on-year, and the turnover of emerging domestic brands increased by 4 times. Anta, Li-Ning, Peak, Qiaodan, and 361° rank among the top five most popular Chinese sports brands.
Guosen Securities pointed out that most key companies showed obvious competitive advantages during the 618 consumption peak season, and the growth of local head sports brands was particularly eye-catching under the enthusiasm for manufacturing in China. Brands that are optimistic about accelerating fundamental growth in the short term will deliver dazzling interim results. In the long term, they will continue to be optimistic about high-quality companies with leading brand power, leading product power, and leading operating efficiency and health. The brand end focuses on recommending Anta Sports, Li-Ning, Xtep International, Bosideng, Semir Apparel, Winner Medical, and the upstream and downstream are optimistic about the high-quality leading sports track Shenzhou International and Topsports.
Haitong International also suggests paying attention to high-quality Chinese brand apparel companies, believing that the recovery of apparel retail benefits from: 1) the pandemic has been effectively and stably controlled, 2) the Xinjiang cotton incident accelerates the recognition of high-quality Chinese brands, and believes that the Xinjiang cotton incident has shifted consumption in the short term part of the demand for Chinese buyers to purchase overseas brands, and will urge Chinese consumers to incorporate Chinese brands into the same consumption considerations in the long run, and enhance Chinese consumers’ sense of national confidence through wearing Chinese brands. High-quality Chinese sports companies will fully benefit from this trend.
Source: Brokerage China