Anta Sports Products (HK 2020) saw a 114% YOY surge in net profit to RMB 434 mln in 1H 2008, with its revenue increasing by 52% YOY. As the company had already projected its raw material costs for 2008 in 2007 and the average selling price of its products increased in 2008, the company's gross margin posted an significant increase of 5.1% YOY to 38.9%, which highlighted its semiannual performance.

An unidentified analyst said it does not make any sense that the increasing cost of raw materials would influence the company's gross margin. With an improving reputation and better public acceptance, the company is able to raise its average selling price and bargain with distributors and consumers. The ratio of the increase in its average selling price should be higher than that of its production cost. Thus, the company's gross margins for 2008 and 2009 are estimated to rise respectively to 39.3% and 40.6%. Concurrently, its profits are forecasted to increase to RMB 847 and RMB 1.15 bln for 2008 and 2009 respectively.

However, the company's stock slumped by 39% as of June 2008, with its current PE being 9.5, which is only 49% of the 18.8 PE of Li Ning Co. Ltd., the top sports wear producer in China.


Source: Securities Times

Date: 28 Aug 2008

CN01/RL/JL/BT/KM