Anta Sports is really anxious, this is the third time in a year Encountered allegations of short selling, and this time, the attack on Anta was the "Chinese concept stock killer" Muddy Waters.
In this short selling report, Muddy Water questioned that most of Anta Sports’ first-tier distributors are actually subsidiaries of the company, and 70% of Anta’s sales come from these first-tier distributors, so , Anta Sports may fake the company's profits by controlling first-level distributors.
However, in the report, the muddy water affirmed that Anta has a lot to admire in terms of operations and marketing. This is also the recent investment by Lululemon founder Chip Wilson in the company.The main reason, but Anta Sports' financial situation is obviously fraudulent.
Take a closer look at the "big fish" that have been touched by troubled waters in the past few years, including Rino International, China Express Channel, Duoyuan Global Water, Jiahan Forestry and other Chinese concept stocks listed in the United States. These companies have successively delisted or delisted their share prices due to Muddy Waters’ questioning reports.
It is no surprise that Muddy Water will focus on the thriving Anta Sports.
According to the sales revenue ranking, Anta is currently the largest sporting goods brand in China, with a market value of more than 100 billion Hong Kong dollars. In 2018, Anta’s net profit reached a record 4.1 billion yuan ($613 million). The company operates Its profit margin is about 17%, twice as much as that of companies in the same industry as Nike and Adidas.
The higher the performance of the company, the easier it is to become a short-seller.""Prey", based on past experience, companies with much higher performance than their peers are more likely to be targeted by muddy waters. For example, when they short Huishan Dairy, they believe that Huishan Dairy’s gross profit margin is much higher than that of its peers, which may be a false profit. /p>
The evidence chain of Muddy Water
Muddy Water believes that Anta’s high profits are closely related to its distributors Relationship.
In two consecutive short-selling reports, Muddy Water pointed out that the reason why Anta Sports can obtain industry-leading operating profits is not because of its good operations, but because Anta uses a large number of secret control The first-tier distributors fraudulently increased their profit margins.
Through the investigation, Muddy Water obtained background information of 27 distributors, of which at least 25 were first-tier distributors. Among the 46 first-level dealers, the number of dealers secretly controlled by Anta accounted for at least 40, almost contributed 70% of Anta's sales.
In this regard, Anta Sports issued a statement denying that all the 25 distributors of the Group mentioned in the Muddy Waters Report are independent of the company or any of its affiliates, and are in collaboration with them. No associated third party.
However, Muddy Water believes that the relationship between Anta and its distributors can be traced back to 2007 when Anta went public. Anta, founded in the 1980s, was originally a foundry of sports shoes. But the founder of Anta intends to make his own brand, but this is of no interest to large distributors, Anta has to start to build its own network of distributors and retailers. Anta’s controlling shareholder used its capital to invest in its dealer network, and the effect was obvious, and Anta’s sales continued to grow.
As Anta plans to conduct an initial public offering in 2007, Anta insiders realized that it could develop an independent dealer bodySo they reorganized their distributors into their own independent companies. Although these companies have undergone changes such as cancellation and renaming, these first-tier distributors have always been inextricably linked with Anta Sports. Many of the top executives of dealers have the titles of Anta executives in media reports, company personnel and Anta executives have relatives, or the suffix of the dealer’s mailbox is related to Anta.
For this reason, Muddy Waters also gave examples in the report. For example, Guangzhou Anda Trade Development Co., Ltd., which was originally Anta’s largest customer before Anta’s listing, but according to public information after 2012, Guangzhou Anda is no longer associated with Anta.
However, through the investigation and interview of Muddy Water, it was found that Anta and Guangzhou Anda still have a close relationship. Muddy Water believes that as of July 2017, Mr. Wu Yonghua of Anta Sports has served as a supervisor of Guangzhou Anda, and Wu Yonghua himself is a director of Anta Group, Mainly responsible for the dealer’s performance. In addition, the current legal representative of Guangzhou Anda, Lin Aimin is the wife of Wu Yonghua's younger brother Wu Wenhou, who is also one of the original shareholders of Guangzhou Anda.
Muddy Waters interviewed four former senior managers of Anta Both the former manager of a major distributor made it clear that Anta controls the distributors. On Weibo, Lin Aiguo, who is certified as Guangzhou Anda University, is a relative of Wu Yonghua and the head of Anta's Guangdong Region. He once made great contributions to Anta.
For such complex personnel relations, Muddy Water also cited more evidence in the report, pointing to Anta secretly controlling dealers.
The table below shows the number of controlled dealersPeople:
We have proved that the first-level distributor and Anta After the relationship exists, how can people be convinced that Anta can obtain high profits by controlling these dealers?
Muddy Water received a credit report from Anta's first-tier distributors. The report showed that COG in 2017 accounted for approximately RMB 5.5 billion, accounting for approximately one-third of Anta's total reported revenue. The credit reports of these distributors usually show that the gross profit margin is only 7% to 8%, and the net profit margin is close to zero.
According to the normal data of the industry, the gross profit of independent first-tier distributors should be between 30%-35%, while the gross profit of Anta's first-tier distributors is only 7%-8%. This data makes People have doubts.
Based on the above evidence chain, Muddy Water believes that Anta is using its control of these dealers to fraudulently exaggerate the profits in its financial report.
However, Carson Block, the founder of Muddy Waters, said in an interview that he believes that Anta’s share price should fall, but it is not without any value. “Anta has actual business. The problem is that we don’t know the real financial Status."
The attacking Anta
From Carson Block’s statement, Anta’s performance is not useless. In the 2018 fiscal year, Anta achieved revenue of 24.1 billion yuan, an increase of 44.4% from 16.69 billion yuan in the previous year; net profit was 4.103 billion yuan, an increase of 32.8% from 3.09 billion yuan in the previous year. The current latest market value is HK$117.4 billion. As mentioned in the financial report, clothingThe strong growth in sales drove Anta Sports' high revenue growth in 2018.
From the perspective of revenue composition in the past 5 years, Anta Sports revenue mainly comes from the two major categories of footwear and clothing. In recent years, the proportion of footwear revenue has gradually decreased, while the clothing revenue has been significantly The proportion increased.
If Anta’s main business is combined with Li Ning and Xtep Compared with 361 degrees, the four companies are all developing towards multiple categories, but Anta’s ability to control costs is obviously stronger. According to the 2018 financial report data, Anta’s main business costs accounted for the lowest proportion of revenue at 79.64%, while Xtep International, 361 Du and Li Ning accounted for 89%, 92% and 93% respectively.
According to Anta’s financial reports for the past three years, Anta Sports’ gross profit margins are 48.4%, 49.37% and 52.64%, respectively. The gross profit margins of Li Ning, Xtep and 361 Degrees are all lower than that of Anta.
Anta Sports' source of competitive advantage in the sporting goods industry Since two major transformations: one is the transformation from a brand wholesale model to a brand retail model; the other is to establish a multi-brand operation strategy, spend a lot of money to win the brand use rights of FIL in China, and expand to high-end products.
To this day, domestic sportswear brands have lingering fears about the inventory crisis that almost destroyed the confidence of the industry in 2012. After a ten-year golden age, includingThe performance of sporting goods companies including Anta and Li Ning fell precipitously. In 2012, Li Ning suffered a loss for the first time in eight years after being listed. In the same year, although Anta surpassed Li Ning in performance by less than 1 billion yuan, there were also five listings. The first decline in this year.
Long-term reliance on the distributor’s wholesale model has caused brand owners to be insensitive to changes in market demand, and at the same time they cannot perceive consumers’ demands for products, resulting in a serious inventory backlog. At that time, Anta launched There was a trend of store closures. In 2013, Anta closed 318 stores.
In the process of transformation, Anta has established a development strategy of "single focus, multiple brands, and omni-channel", while also accelerating the acquisition of similar companies. According to public data, Anta acquired Sprandi in 2015, Disante, a professional ski sporting goods brand, in 2016, and outdoor brand KOLON and children's clothing brands in 2017.Kingkow.
At the same time, Anta is also very active in expanding international business. In the words of Anta's head Ding Shizhong, "Anta will not be China's Nike, but the world's Anta." Anta purchased the brand use rights of the well-known Italian sports brand FILA in China. It also established a joint venture with South Korea’s high-end outdoor brand KOLON to launch KOLON brand clothing in China. Anta is responsible for the back-end Manufacturing and operations.
The expansion of international business caters to the trend of consumption upgrades in the sports brand market. Young consumers’ preference for niche brands has made FILA the brand sought after in China. Anta Sports Group President Zheng Jie once said, In 2018, the steady growth of Anta's performance depends on the performance of FILA. Sales growth exceeded 80%, and the annual turnover exceeded 10 billion yuan, making it the brand that contributed the most to the growth rate.
So far, it has completely changed the brand image of Anta that has not been "high-end" for a long time, and it has also opened up a new market for outdoor sports.
In December last year, an investor consortium consisting of Anta Sports, Fangyuan Capital, Anamered Investments and Tencent completed the acquisition of Amer Sports, which was also the largest acquisition of domestic sports brands in 2018 case.
In March of this year, Anta took the lead in acquiring Finland’s Amer Sports, the manufacturer of Wilson tennis rackets and Louisville Slugger baseball bats, for 5.6 billion euros. Expanding the boundary of selling sportswear to more scenarios may become Anta's new profit growth point.