Table of contents
A China sportswear primer 2
Valuation: Consider both returns and growth 5
Return comparison: Why is the China sports companies’ CROCI much higher? 13
Growth comparison (I): Sales growth 16
Growth comparison (II): Gross margin expansion 20
Growth comparison (III): Operating expense 22
Analyzing China sports distribution model: how distributors’ P/L may impact brand performance 25
What drives stock prices: Wholesale order book and retail SSS 28
China sports industry 30
Dongxiang (3818.HK, Buy): Reiterate our Buy rating 33
Li Ning (2331.HK, Neutral): Maintain our Neutral rating 35
Anta (2020.HK, Sell): Downgrade to Sell; add to Conviction List 37
Xtep (1368.HK, Buy): Initiate with a Buy rating 39
Peak Sports (1968.HK, Buy): Initiate with a Buy, add to Conv. List 41
361 Degrees (1361.HK, Neutral): Initiate with a Neutral rating 43