Sportswear Industry: the strongest segment of the apparel industry, optimistic about the growth of the industry in the next five years. According to the data of prospective industry research institute, the retail scale of China's sportswear market in 2021 was 371.8 billion yuan, a year-on-year increase of 19.1%, and the 20192021cagr was 7.8%. From the perspective of horizontal comparison, sportswear tracks have maintained a leading position in terms of market growth and concentration. We are optimistic about the growth of the industry in the next five years (double-digit compound growth is expected). The main reasons are as follows: 1) compared with overseas mature markets, the Chinese market is still in its infancy and has great potential in the future; 2) The policy continues to increase and improve the participation rate of sports; 3) Motion scene subdivision + extension.
We believe that there are three core changes in the industry in the future: 1) growth path: from "quantity" to "quantity and price". From Nike's annual revenue growth in Greater China, from fy12 to fy21, "volume" growth is still the main driving force for the company's revenue growth. We believe that with the intergenerational changes of consumer groups, young consumers' pursuit of product quality has significantly improved, and the growth drive of the industry is expected to turn to the simultaneous increase of "volume and price" in the future. We see that many Chinese leaders have successively released plans to improve brand potential energy (for example, Anta launched the main brand "winning plan" last year), boosting the growth trend of ASP in the industry. 2) Product category: optimistic about the potential of women's products and the development of outdoor categories. In terms of women's categories, overseas leading brands have accelerated the layout, and China's leading brands Li Ning and Anta have also begun to make efforts. For example, Anta has joined hands with Gu ailing to layout the women's market. In terms of outdoor categories, with the promotion of the Winter Olympic Games and the increase of per capita income, high-quality outdoor brands will usher in rapid growth. 3) Sales channels: from focusing on the number of stores to paying more attention to the operation quality and structure optimization of stores. The number of stores in China tends to be stable for both Chinese and overseas brands. All brands no longer focus on net store opening as a key indicator, but pay more attention to the improvement of store operation quality and the proportion of large stores. In terms of channel structure, we will also pay close attention to the impact of DTC transformation of leading brands (including Nike, ADI, Anta, etc.) on the company's operating efficiency.
Competition pattern: the trend of national tide continues, and attention is paid to the stabilization of 22h2 overseas leaders. Benefiting from the Xinjiang cotton incident, the market share of Chinese brands increased significantly in 2021, and Adi suffered a lot. Its lost share was mainly undertaken by local brands such as Li Ning and Anta. Looking forward to 2022, we believe that Chinese brands are expected to continue the process of domestic substitution and continue to increase their market share; In terms of overseas brands, as the epidemic of 22q2 has a greater impact on the first and second tier cities, the share of overseas brands in 22h1 is expected to decline. Later, with the improvement of the epidemic and the recovery of the supply chain, the share of 22h2 is expected to stabilize.
Investment logic in 2022: 1) Fundamentals: in the post epidemic era, China's sports leaders are more resilient. According to the data of the prospective industry research institute, on the one hand, the year-on-year decline of the sportswear sector in 2020 was only 2.4%, which was significantly less than that of other sectors; On the other hand, the moving sector will recover fastest in 2021. Combined with the external guidance of listed leaders, despite factors such as high base + uncertainty of epidemic situation, China's top brands are still cautious and optimistic about the sales expectation in 2022. 2) Valuation: China's leader has returned to the level before the epidemic in 2019, and there is room for upward repair in the future. Combined with its own fundamentals and the medium and long-term prosperity of the industry, the current valuation level of China's leading enterprises is underestimated. In addition, compared with overseas leaders, China's leading brands are relatively better and more sustainable, and their profitability and growth rate are expected to obtain a certain valuation premium in the future.
Investment proposal and investment object
We believe that China's sportswear industry will continue its high prosperity in the next five years. On the other hand, despite the short-term disturbance of the epidemic, the industry is expected to maintain good growth toughness. Under the background of deepening the national tide and continuously increasing the market share of local brands, we are optimistic about China's leading brands with strong short-term fundamentals and upward valuation. We recommend Li Ning (02331, buy), Anta sports (02020, buy), Tebu International (01368, buy) and pay attention to taobo (06110, overweight).
Risk tips: epidemic fluctuations, economic slowdown, short-term performance fluctuations caused by recycling dealers, rising raw material costs, etc
