Anta Sports (2020 HK, TP HK 14.84, BUY):  

Expect profits to grow by 24% pa for FY10-12

Anta delivered a 40% profit growth in FY09, achieved Rmb1,251m that is 2.5% more than we expected, and beat market consensus by about 12%. In fact, the FY09 balance sheet shows Anta had raised its “accrual” by Rmb276m, from Rmb98m to Rmb374m. This item represents unpaid expenses charged to the p&l, and it being drastically raised means profits are shifted to the coming year. Management admits this deliberate feat will reduce FY10’s reported expenses. As such, even the Q1-Q3 trade fairs indicated about 18% order growth, we are confident Anta would increase its profits by about 23.5% in FY10. Furthermore, given the profit contributions from Fila, we estimate Anta should maintain profit growths at 22-24% in 2011 and 2012. The Anta shares are now trading at 16.5x FY10e eps. We set our HK$14.8 price target at the sum of 20x FY10e eps, and 80% of its net cash of HK$1.57/share.  We maintain our Buy rating.