HSBC-中国服装行业-中国运动服饰：准备好锻炼

24June2022

ChinaSportswear

Readyforaworkout

Equities

TextilesApparel&LuxuryGoods

China

令Webelievetheworstmightbeoverforsportswearbrandsin2Qandseethemgraduallygetbackontrackin2HasChinare-opens

令However,anexcessofglobalsportswearinventoryremainsaconcernformanufacturers,especiallyin2023e

令StayBuyonbrandsLiNing+XtepandmanufacturerShenzhou;remainHoldonTopsports(aretailer)andbrandAnta;downgrademanufacturerYueYuenfromBuytoHold

Chinesesportswearshoppersareback.WehighlightedriskstothesportswearsectorinourJanuaryreport:Expectgrowthtohitaspeedbumpin2022e(31January2022).GrowthwasderailedbyCOVID-19lockdownsattheendofMarch.Thereisahighbasetocopewithin2Qfromayearago,and2Q22domesticbrands’retailsalesarelikelytomisscompanies’initialtargets.Domesticbrands’sharesonaveragefellby20%YTDvsa10%declineintheHSIindexduringthesameperiod.

Earningsrisksarecontainable.Weexpect1H22resultstotrackbelowthesecompanies’targets.Thatisalsowhyour2022eearningsestimatesarebelowconsensus.Still,webelievetheexcesschannelinventoryin2Q22canberesolvedquickly,asgrowthmomentumgraduallyresumespostre-openingfromJune.Specifically,webelievetheearningsrisksin2H22arecontainablethanksto:1)ahealthychannelinventorystructureentering2022;2)promotionshelpeddigestinventory,accordingto“618”shoppingfestivaldata.Whilewelowerourprojectionfordomesticbrands’retailsell-throughin2Q22,weexpecttheirgrowthtopickupto21%/18%/11%forLiNing/Xtep/Anta(seeFigure2)in2H22,respectively.Duetoweaker-than-expected2Q22,wecutour2022enetprofitestimatesforLiNing/Antaby4.5%/4.3%,leavingboth8%belowconsensus,andleaveestimatesforXtepunchanged(inlinewithconsensus).

Inventorycycleaconcernandscenarioanalysis.Whilewelikesportswearmanufacturersfortheirrecoverycyclein2022,concernsoveranegativeglobalinventorycycleovershadowsordervisibilityin2023e,ashighlightedinSportinggoodsrecap

(14June2022).WestillbelieveShenzhoucanmanagestableordergrowthin2023e(assumingnocapacitydisruptionfromCOVID-19outbreaks),whileYueYuen’searningsaremoresensitivetotheriskoflowercapacityutilisationbasedonamorelabourintensivecoststructure.Inthisreport,wealsoprovideearningsensitivityanalysistotheir2023eorderscenarios.

RemainBuyonLiNingandXtep;HoldonAntaduetomorerisksfactors.WemaintainourBuyratingsonLiNingandXtepwithnewTPsofHKD76.10(oldHKD70.50)andHKD16.00(oldHKD14.20)andHoldratingsonAntawithanewTPofHKD89.50(oldHKD105.50)andTopsportswithanunchangedTPofHKD5.89.WemaintainourBuyratingonShenzhouwitha36%lowernewTPofHKD110.50(oldHKD170.8).WedowngradeYueYuenfromBuytoHoldwithanewTPofHKD11.60(oldHKD13.60),mostlydrivenbythecutinourearningsestimatesgivenworse-than-expectedretailsegmentperformancein1H22.Seethecompanysectionforvaluationandrisks.

LinaYan*,CFA

ConsumerAnalyst,HongKong/mainlandChina

TheHongkongandShanghaiBankingCorporationLimitedlinayjyan@.hk

+85228224344

VishalGoel*

ConsumerAnalyst,HongKong/mainlandChina

HSBCSecuritiesandCapitalMarkets(India)PrivateLimitedvishalgoel@hsbc.co.in

+9108067372115

*Employedbyanon-USaffiliateofHSBCSecurities(USA)Inc,andisnotregistered/qualifiedpursuanttoFINRAregulations

AsiamoneyBrokersPoll2022

Votingopens1June–29JulyIfyouvalueourserviceandinsight

Votenow

Disclosures&Disclaimer

ThisreportmustbereadwiththedisclosuresandtheanalystcertificationsintheDisclosureappendix,andwiththeDisclaimer,whichformspartofit.

Issuerofreport:TheHongkongandShanghaiBankingCorporationLimited

ViewHSBCGlobalResearchat:

2

Equities●TextilesApparel&LuxuryGoods24June2022

Figure1.Keychangestoratingsandestimates

Current________TP_______Rating___Upside/Marketcap3mADTV_____________TPimplied__________

CompanyTickerCurrencyprice

OldNewOldNewdownside(USDm)(USDm)

PE(x)

22e

PE(x)

23e

Dividendyield22e

Anta2020HKHKD84.10105.5089.50HoldHold6.4%29.111026.921.81.4%

LiNing2331HKHKD63.8070.5076.10BuyBuy19.3%21.316037.530.60.8%

Xtep1368HKHKD13.0214.2016.00BuyBuy22.9%4.42029.623.22.0%

Topsports*6110HKHKD6.375.895.89HoldHold-7.6%5.0712.911.93.9%

Shenzhou2313HKHKD91.50170.80110.50BuyBuy20.8%17.56027.521.42.2%

YueYuen551HKHKD10.9013.6011.60BuyHold6.4%2.2%

Note:*FY23e/24ePE,FY23edividendyield.Pricedasofcloseat22June2022.

Source:Bloomberg,HSBCestimates

3

Equities●TextilesApparel&LuxuryGoods24June2022

Chineseshoppersareback

令Webelievetheworstmightbeoverforsportswearbrandsin2Q22andseethemgraduallygetbackontrackin2HasChinare-opens

令However,anexcessofglobalsportswearinventoryremainsaconcernformanufacturers,especiallyin2023e

令MaintainBuyonLiNing,Xtep,Shenzhou;remainHoldonTopsportsandAnta;downgradeYueYuenfromBuytoHold

Salesmomentumshouldhavebottomedin2Q22

China’ssportswearindustry’sgrowthwasdisruptedbystringentCOVID-19lockdownsathomefromtheendofMarch.AsweshowinFigure2,thecountry’sapparelretailsalesfromabove-scaleenterprisesdeclinedby8%y-o-yinApriltoMayfromflatgrowthin1Q22.

Accordingly,weexpectkeydomesticsportswearbrands’retailsell-throughtobedisruptedaswell.Specifically,weexpectLiNing/Anta/Filaretailsell-throughtodeclineby10%/10%/15%,respectively,andthatforXteptogrowby5%y-o-yin2Q22e.Allthesearelowerthanourpreviousestimatesfor2Q22asdetailedinFigure2.

However,weexpectgrowthtocomebackin2H22eandexpectLiNing/Xtep/Anta/Fila’sretailsell-throughtogrowby21%/18%/11%/7%y-o-yin2H22e,orby15%/18%/8%/2%y-o-yin2022e,respectively.

Figure2.Brands’quarterlyretailsell-throughvsindustrygrowth

1Q212Q213Q214Q211Q222Q22*

Industrygrowth

Chinaapparelretail54.2%18.5%-1.7%-2.0%-0.9%-8.1%

Chinasport&recreationalgoodsretail

45.2%

24.7%

18.9%

7.9%

-2.0%-3.8%

Brands’retailsell-through

1Q21

2Q21

3Q21

4Q21

1Q22

__2Q22e

___2H22e___

___2022e___

Old

New

Old

New

Old

New

LiNing

86%

92%

42%

31%

28%

-6%

-10%

25%

21%

18%

15%

Anta

44%

36%

13%

15%

17%

-3%

-10%

18%

11%

13%

8%

Fila

78%

33%

5%

8%

5%

-7%

-15%

14%

7%

7%

2%

Antaotherbrands

118%

73%

38%

32%

43%

NA

NA

NA

NA

30%

25%

Xtep

55%

33%

15%

22%

33%

15%

5%

9%

18%

15%

18%

Note:*2Q22industrygrowthisforApril-Mayonly

Source:CEIC,HSBCestimates

4

Equities●TextilesApparel&LuxuryGoods24June2022

Domesticbrands’marketsharegaincontinued

WehighlightedinourreportExpectgrowthtohitaspeedbumpin2022e(31January2022)thatdomesticbrandswillcontinuegainingmarketsharefrominternationalbrands,butthepacemightnotbeasstrongaswhatwehaveseenin2021,whentopdomesticbrandsgainedmorethan3pptsofmarketshareoverNikeandAdidasinmainlandChina.

Butitturnedouttherewerestrongmarketsharegainsfordomesticbrandsin1Q22.DuringtheCOVID-19disruptionsfromtheendofMarch,whilewedon’thavethefinal2Q22numbers,quarter-to-datedatasuggestsdomesticbrandshavesustainedmomentuminmarketsharegains.

Thatsaid,weaksalesbyinternationalbrandsledtomoresevereinventoryissuesthandomesticbrands,whichledtodestockingthroughheavydiscountingaswhatwehaveseenintheonline618promotionfestival.

Figure3.Salesgrowthcomparison

1Q212Q213Q214Q211Q22

Retailsell-throughy-o-y

LiNing

86%

92%

42%

31%

28%

Anta

44%

36%

13%

15%

17%

Fila

78%

33%

5%

8%

5%

AntaOtherbrands

118%

73%

38%

32%

43%

Xtep

55%

33%

15%

22%

33%

Localcurrencyrevenuegrowthy-o-y

Nike

adidas

Source:CompanyData

42%

156%

9%

-16%

1%

-15%

-24%

-24%

-8%-35%

Domesticbrands’earningrisksarecontainablein2H22

Webelievetheriskstodomesticbrands’earningsin2H22arecontainable,thanksto1)healthychannelinventorystructureenteringinto2022;2)promotionshelpeddigestinventory.

Healthychannelinventoryentering2022

Firstly,whendomesticbrandsstarted2022,theywereingoodshapeasweshowinFigure4,intermsofchannelinventoryandinventorystructure.

Toputitsimply,theirchannelswerelightintermsofthelevelsofinventoryandtheinventorywasmostlyfromin-seasonnewproducts.

Therefore,growthdisruptioninApril-May2022duringtheCOVID-19lockdownswilllikelyonlycauseinventoryissuesfor2Q22orders.

Figure4.Channelinventorystructure(upto1Q22)

_______Anta______________LiNing_____________Xtep________

2Q214Q211Q222Q214Q211Q222Q214Q211Q22

Channelinventory(months)_______Anta_______

5<54.04.0

________Fila________

66-76-7

Newproducts(<6mon)%contribution

Offlinechannelnewproductcontribution

tochannelinventoryNANANA83%92%90%NANANA

tototalsales80%+80%+80%+85%86%83%85%85%

Source:Companydata

5

Jan-21

Feb-21

Mar-21

Apr-21

May-21

Jun-21

Jul-21

Aug-21

Sep-21

Oct-21

Nov-21

Dec-21

Jan-22

Feb-22

Mar-22

Apr-22

May-22

June618

Fila,14.4%

Equities●TextilesApparel&LuxuryGoods24June2022

“618”helpeddigestchannelinventory

Webelievethatexcessiveinventoryin2Q22canbedigestedbypromotions,whichwilllikelybringchannelinventorydownorthesell-outratioupbytheendofJuneorJuly.Inshort,itmeanstheriskstoearningscanbecontainedin2Q22,ratherthanspreadingto2H22.

First,aquickwordon“618”,whichisoneoftwomajoronlinepromotionfestivalsinmainlandChina,andtheotherisdouble11(11November)inthefourthquartereveryyear.In2022,the“618”(18June)onlineshoppingfestivalranfrom25Mayto20June,comparedwith26Mayto20Junein2021.

The618onlinesalesdatasuggestsdiscountinghashelpeddrivestrongsell-throughforsportswearbrands,includingforinternationalbrands,whichsufferedmorefromexcessiveinventory.Weexpectsimilarlevelsofdiscountingintheofflinechannelin2Q22,sothechannelcouldrebalanceitselftowardsamoreoptimalinventorylevelbytheendofJuneorJuly.

InFigure5,the618onlinesalesdatafromTmall(source:Moojing)showsthatthesportswearindustryGMVonTmallwasupby31.1%y-o-yduringthisonlinepromotionevent,andthatforNike,adidas,Anta,LiNing,FilaandXtepwasupby248.9%/4.5%/167.6%/24.7%/14.4%/42.3%,respectively.RankedbythesizeofGMV,Nike,Anta,adidas,Fila,LNandXtepbrandrankedfromthe1sttothe6thduringtheonlinepromotiononTmallrespectively.

Figure5.GMVgrowthbybrandsonTmall,TaobaoandJD

240.0%200.0%160.0%120.0%80.0%40.0% 0.0%-40.0%-80.0%

Nike,248.9%

Anta,167.6%

Xtep,42.3%

LiNing,24.7%

Adidas,4.5%

Note:June618:Tmalldataonly

Source:Moojing

OverseasdemandovershadowsOEMs’outlookin2023e

Incontrasttothebrighteningoutlookfordomesticsportswearbrands,theoutlookforsportswearOEMsin2023eisstillcloudedbythenegativeretail/retailinventorycycleoverseas.

AsmentionedinHSBCconsumerandretailresearchteam’sreportSportinggoodsrecap:Bracingforanotherlapofcomplexity(14June2022),thesportinggoodssectormightmovefromverytightinventorylevelsforthepast18monthstooneasearlyasH2thisyearwhereinventoriesmightendupbeingabittooplentiful.Withtightinventories,thesectorenjoyedsomegrossmarginsupport(morefull-pricesales);withsupplychainsfunctioningalotmoreefficientlynowandpossiblysomeover-ordering,wecouldsoonbeinasituationinwhichinventoriesarelargerthanwhatthemarketcanabsorb.

6

Jan-20-0.7%4.1%

Feb-203.8%6.2%

Mar-20-17.8%2.5%

May-20-42.9%-2.2%

Jun-20-39.3%-0.6%

Aug-20-34.9%0.9%

Sep-20-32.6%2.0%

Oct-20-30.0%2.8%

Nov-20-28.5%3.1%

Dec-20-26.4%3.5%

Jan-21-11.3%89.%

Feb-21-12.8%84.%

Mar-2114.7%15.8%

Apr-2123.0%57.7%

81.3%

74.4%

70.0%

64.2%

58.2%

536.%

51.5%

48.4%

19.1%

25.8%

16.7%

14.9%

12.9%

May-2123.7%

Jun-2122.2%

Jul-2120.9%

Aug-2119.8%

Sep-2119.0%

Oct-2118.4%

Nov-2118.3%

Dec-2117.9%

Jan-2210.9%

Feb-2214.0%

Mar-2210.8%

Apr-229.6%

Apr-20-37.5%-25.%

Jul-20-36.5%0.7%

May-228.9%

Equities●TextilesApparel&LuxuryGoods

24June2022

Figure6showsUSretailsaleswereupby8.9%in5M22(2021:up17.9%),butslowedto6.9%inMay2022.UKnon-foodretailsaleswereupby36.7%(2021:up11.5%)in1Q22,butslowedto5.8%y-o-yinApril.

Bycategories,USclothingretailwasup12.9%in5M22,andgrowthslowedto6.1%y-o-yinMay.InUK,textile,clothing,footwearandleatherretailsaleswereupby86.0%in1Q22,butgrowthslowedto11.8%y-o-yinApril.

Figure6.USandUKretailsalesgrowth

USRetailSalesGrowth%

USTotalRetailTradeClothingandClothingAccessoriesStores

UKRetailSalesGrowth%

99.7%

86.0%

24.2%

12.2%36.7%11.8%

-3.1%-3.0%-15.3%

65.1%

3.8%2.5%3.2%3.1%4.6%3.1%2.3%-0.3%-7.8%

-36.2%

5.5%8.1%5.8%

0.9%0.7%-0.3%1.6%3.4%2.2%0.6%-0.8%

-12.7%

-17.5%-19.4%

-39.6%

-53.8%

1Q182Q183Q184Q181Q192Q193Q194Q191Q202Q203Q204Q201Q212Q213Q214Q211Q22Apr'22

Non-foodStoresTextile,Clothing,FootwearandLeather

Source:USCensusBureau,UKCensusBureau

Whiledemandoverseashassloweddown,retailinventoryhasgoneup.InFigure7,overallUSretailinventoryandthatforclothingwasupby15.1%and21.3%y-o-y,respectively.

Inevitably,thedownwarddemandcycleandinventorycycleoverseaswillovershadowapparelandfootwearOEMs’orderoutlookin2023e,orasearlyas4Q22e.

7

USDbillion

697

692

653

652

661

636

598

581

587

594

605

614

617

622

624

625

616

606

602

605

608

610

610

610

622

649

661

671

Jan-20

Feb-20

Mar-20

Apr-20

May-20

Jun-20

Jul-20

Aug-20

Sep-20

Oct-20

Nov-20

Dec-20

Jan-21

Feb-21

Mar-21

Apr-21

May-21

Jun-21

Jul-21

Aug-21

Sep-21

Oct-21

Nov-21

Dec-21

Jan-22

Feb-22

Mar-22

Apr-22

USDbillion

Jan-20

Feb-20

Mar-20

Apr-20

May-20

Jun-20

Jul-20

Aug-20

Sep-20

Oct-20

Nov-20

Dec-20

Jan-21

Feb-21

Mar-21

Apr-21

May-21

Jun-21

Jul-21

Aug-21

Sep-21

Oct-21

Nov-21

Dec-21

Jan-22

Feb-22

Mar-22

Apr-22

Equities●TextilesApparel&LuxuryGoods24June2022

Figure7.USRetailInventory

710

690

670

650

630

610

590

570

550

USRetailInventory-seasonallyadjusted(USDbn)

53535453

51

48474645454545454545464645454546464748505356

TotalClothing&ClothingAccessoryStores(RHS)

60

55

50

45

40

35

30

25

20

25.0%20.0%15.0%10.0% 5.0% 0.0% -5.0%-10.0%-15.0%-20.0%

USRetailInventory:seasonallyadjusted-YoY%

21.3%

15.1%

TotalClothing&ClothingAccessoryStores

Source:USCensusBureau

Sector’sshareperformance

Whenwelookatthesector’sperformanceYTD,domesticbrands’shareperformancereachedthebottominMayforLiNingandAntaandthatforXtepreachedthebottominMarch.AlltheirsharesperformedpositivelyinJune,likelydrivenbythere-openingsasCOVID-19lockdownseasedfromJune.

Whereas,theshareperformanceofOEMs,includingShenzhouandYueYuen,reachednewlowsYTDinMay-Juneonthedeterioratingoverseasretailoutlook.

8

Jan-20

Feb-20

Mar-20

Apr-20

May-20

Jun-20

Jul-20

Aug-20

Sep-20

Oct-20

Nov-20

Dec-20

Jan-21

Feb-21

Mar-21

Apr-21

May-21

Jun-21

Jul-21

Aug-21

Sep-21

Oct-21

Nov-21

Dec-21

Jan-22

Feb-22

Mar-22

Apr-22

May-22

Jun-22

Mar'22:MassivespreadofOmicronVariant

tomorethan28provinces,lockdownin

Shanghaifrom28thMarch

Equities●TextilesApparel&LuxuryGoods24June2022

Figure8.Sharepriceperformance(1January2020to22June2022)

350

300

250

200

150

100

50

0

Feb'21:COVID-19resurgenceinShanghai,BeijingandHebeiandstaylocalpolicy

Aug'21:SpreadofDeltaVariantfromNanjingtoseveralcities

Nov'21:COVID-19resurgenceinmorethan20cities

DomesticBrandsInternationalBrandsOEM

JantoYTD

2021YTDtrough%chng

Source:RefinitivDatastream

HangSengIndex

DomesticBrands

Xtep(1368HK)

LiNing(2331HK)

Anta(2020HK)

InternationalBrands

Topsports(6110HK)

Nike(NKEUS)

adidas(ADSGR)

OEM

Shenzhou(2313HK)

YueYuen(551HK)

-14.1%

102.3%

245.0%

67.4%

-5.4%

-13.2%

-32.4%

17.4%

-24.6%

-10.8%

-1.9%

-19.6%

-7.9%

-15.3%

1.0%

-22.5%

-24.5%

-30.5%

-17.2%

-35.1%

-39.1%

-25.3%

-37.4%

-13.2%

-21.3%

-37.3%

-37.5%

-41.0%

-33.4%

-36.1%

-30.8%

-36.4%

-41.0%

-30.1%

-40.2%

-20.0%

Sensitivitytests

Admittedly,uncertaintyremainsaroundthemagnitudeofthegrowthrecoveryfordomesticbrandsin2H22eorordergrowthforOEMsin2023e.Figures9-10showoursensitivityanalysisforsportswearOEMsanddomesticbrands/retailers,respectively.

Specifically,forOEMs,forevery1%changetoourbasecaserevenuegrowthin2023e,ShenzhouandYueYuen’sbottomlinesensitivityisnegative2.0%and7.8%respectively.

Figure9.SportswearOEMs2023eearningssensitivity

Basecase2023e

Basecase2023eEPS

%diffinEPS

EPScurrency

Sensitivityto1%

changetothe

basecase

revenuegrowth

Shenzhou

Revenueupby15%y-o-y;GPmarginof

30.0%;EBITmarginof22.1%;Netmarginof

20.3%in2023e4.40-2%RMB

YueYuenIndustrial

Manufacturing(mfg)revenueupby5.1%y-o-y

andMfgGPMof18.5%andMfgOPMof5.4%

in2023e0.19-8%USD

-2.0x

-7.8x

Source:HSBCestimates

9

Equities●TextilesApparel&LuxuryGoods24June2022

Figure10.Sportswearbrands2022eearningssensitivity

Basecase2022e

Basecase%diffin

EPSEPS

EPScurrency

Sensitivityto1%

changetothe

basecaseofthe

respective

segment’s

revenuegrowth

Anta

Anta-Fila

Anta-retailsegmentAnta-wholesalessegment

Anta-otherbrands

Retailrevenueupby2%y-o-y;retailEBITmarginof22.5%in2022e.

Retailrevenueupby27%y-o-yin;retailEBITmarginof2.0%in2022e.

Wholesalesrevenueupby3%y-o-y;WholesalesEBITmarginof32.3%in2022e.Retailrevenueupby25%y-o-y;retailEBITmarginof18.0%in2022e.

2.84

2.84

2.84

2.84

-2%

-1%

-1%

0%

RMB

RMB

RMB

RMB

-1.9x

-1.0x

-.5x

-0.3x

-1.3x

-1.0x

-3.1x

-0.4x

-1.1x

-4.9x

LiNing

LiNing-retailsegment

LiNing-wholesalessegment

-1%

1.73

RMB

-1%

1.73

RMB

Retailrevenueupby15%y-o-y;retail

contributionmarginof26.5%in2022e.

Wholesalesrevenueupby15%y-o-y;

Wholesalescontributionmarginof37.7%in

2022e.

Xtep

Xtep-Xtepbrand

Xtep-Otherbrands

-3%

0%

0.45

0.45

RMB

RMB

Xtepbrandrevenueupby25%y-o-yand

EBITmarginof17.2%in2022e.

Othersbrandrevenueupby29%y-o-yand

lossofRMB140mnin2022e.

Topsports*(FY23e)

Topsports

Retailrevenueupby2%y-o-yandretailEBIT

marginof13.0%inFY23e.0.39

-1%RMB

YY

YueYuen-retailsegmentRevenuedropby11%y-o-yinUSD,or9%in

RMB;retailEBITmarginof2.8%in2022e.0.15-5%USD

*Note:FY23edataforTopsports

Source:HSBCestimates.

Valuationbeyondvolatility

InFigure11,wetrytoshowthecompanies’valuationsbeyondthevolatilityfromCOVID-19lockdownsortheglobalinventorycycle.

Specifically,weillustratetheir2022eand2023eEPSvis-à-vistheirrespectiveaverageone-yearforwardPEoverthelastthreeyears(thePElinelabelledbysign“x”).

ThesolidPElineshowsthePEvaluationbasedonourestimates,orthebase-casescenarioforearnings.

ThedottedPElineshowsthescenarioPEvaluationbasedonearningswith5%variationtoourbase-caseonthekeydrivers.

Fordomesticbrandsandretailers(YueYuen–retailsegment,TopsportsFY24e),the2023eforecastsreflectanearfull-recoveryscenario.ForOEMs,includingShenzhouandYueYuen,our2023ehavenotreflectedthescenariosofsignificantordercutsfrommajorclients.

Thus,acrossallcompanies,thePEon2023eEPSshouldbeagoodindicatoroftheirvaluationonnormalisedearnings.

ForscenarioPEvaluation,thedottedPEline,inordertoreflectthedifferenceintimingoftheoccurrenceoftheriskfactors:

令Domesticbrands:thedottedlineshowsthe2022ePEbasedon5%downsidescenarios,reflectingtheCOVID-19lockdownrisk.

令OEMs:thedottedlineshowsthe2023ePEbasedon5%downsidescenariostotheir2023eearnings,reflectingtheglobalinventoryrisk.

10

31.4

26.5

26.2

26.5

19.8

24.1

25.7

22.7

18.9

16.1

20.5

17.7

14.8

11.5

15.4

14.0

Equities●TextilesApparel&LuxuryGoods24June2022

Figure11.PEvaluations

40.0

35.0

30.0

25.0

20.0

15.0

10.0

5.0

38.0

33.4

28.4

25.3

12.3

12.9

9.6

7.4

AntaLiNingXtepTopsports*ShenzhouYueYuen

2022ePE2023ePEHistoricalavg1-yrfrwdPEoverlast3yearsScenarioPE

Note*:FY23andFY24dataforTopsports

Source:HSBCestimates

Earningsrevision

Asdiscussedearlier,duetotheCOVID-19disruptionsinApril-May,welowerourretailsell-throughexpectationsfordomesticbrandsin2022eaccordingly.

Specifically,wereflect:

令Ourestimatesoftheretailsell-throughin2Q22e.

令Assumptionforagradualrecoverytopre-lockdownlevelsin3Q22eand4Q22e.

Wealsolowerourmarginassumptionforsportswearbrands,especiallyin1H22e,byconsideringtheextrapromotionalcoststodigest2Q22inventoryandpotentialoperatingleverage.

Ourcurrent2022enetprofitforecastsforLiNingandAntaare4.5%/4.3%lowerthanbeforeon2.6%/1.7%lowerrevenueforecasts.

Our2022eforecastsforXtepandTopsportsremainlargelyunchanged.

ForOEMs,weunderstanditistooearlytoquantifytheearningsrisksin2023e,otherthandoingsensitivitytests,astheystillhavesixmonths’tomanagetheirorderbooks.Weonlymoderatelyreflectsomeoftheorderrisksin4Q22eand2023e,andourcurrent2023enetprofitforShenzhouandYueYuenare2.9%/3.1%lowerthanbeforeon2.1%/8.1%lowerrevenueforecasts.

11

Equities●TextilesApparel&LuxuryGoods24June2022

Figure12.Earningsrevision

__________FY24e____________OldNewDiff

FY20

___________FY22e_______________________FY23e____________

FY21OldNewDiffOldNewDiff

Anta(RMBm)

Totalrevenue

35,512

49,328

55,507

54,590

-1.7%

65,703

64,062

-2.5%

77,880

75,366

-3.2%

4.7%

38.9%

12.5%

10.7%

18.4%

17.4%

18.5%

17.6%

15,749

24,012

27,615

28,030

1.5%

32,946

33,306

1.1%

39,324

39,647

0.8%

-9.7%

52.5%

15.0%

16.7%

19.3%

18.8%

19.4%

19.0%

17,450

21,822

23,350

22,193

-5.0%

26,852

25,078

-6.6%

30,880

28,338

-8.2%

18.1%

25.1%

7.0%

1.7%

15.0%

13.0%

15.0%

13.0%

2,313

3,494

4,542

4,368

-3.8%

5,905

5,678

-3.8%

7,676

7,381

-3.8%

35.4%

51.1%

30.0%

25.0%

30.0%

30.0%

30.0%

30.0%

9,138

10,989

11,415

10,810

-5.3%

13,738

13,362

-2.7%

16,389

15,847

-3.3%

5.8%

20.3%

3.9%

-1.6%

20.3%

23.6%

19.3%

18.6%

5,162

7,720

7,980

7,636

-4.3%

9,589

9,422

-1.7%

11,568

11,309

-2.2%

-3.4%

49.6%

3.4%

-1.1%

20.2%

23.4%

20.6%

20.0%

14.5%

15.7%

14.4%

14.0%

14.6%

14.7%

14.9%

15.0%

5,763

7,801

7,924

7,614

-3.9%

9,519

9,389

-1.4%

11,333

11,112

-1.9%

Y-o-y%

-Antabrand

Y-o-y%

-Filabrand

Y-o-y%

-Otherbrands

Y-o-y%

Operatingprofit

Y-o-y%

Netprofit

Y-o-y%

Netmargin

Netprofitbeforeloss/

profitbeforeJCEincome

-3.6%35.4%1.6%-2.4%20.1%23.3%19.1%18.4%

16.2%15.8%14.3%13.9%14.5%14.7%14.6%14.7%

Y-o-y%

NetmarginbeforeJCE

income

LiNing(RMBm)

14,457

22,572

26,677

25,986

-2.6%

32,381

30,974-4.3%

39,007

36,913

-5.4%

7,533

11,720

13,803

13,495

-2.2%

17,469

16,498-5.6%

21,722

20,124

-7.4%

6,924

10,853

12,874

12,491

-3.0%

14,912

14,476-2.9%

17,285

16,789

-2.9%

2,196

5,136

5,677

5,390

-5.1%

7,096

6,668-6.0%

8,763

8,297

-5.3%

42.3%

133.9%

10.5%

4.9%

25.0%

23.7%

23.5%

24.4%

1,698

4,011

4,538

4,334

-4.5%

5,613

5,305-5.5%

6,904

6,569

-4.9%

13.3%

136.1%

13.1%

8.1%

23.7%

22.4%

23.0%

23.8%

11.7%

17.8%

17.0%

16.7%

17.3%

17.1%

17.7%

17.8%

Totalrevenue

-Retail

-Wholesales

Operatingprofit

Y-o-y%

Netprofit

Y-o-y%

Netmargin

Xtep(RMBm)

Totalrevenue

8,172

10,013

12,567

12,567

0.0%

15,171

15,171

0.0%

18,340

18,