Lockdowns Will Weigh on Anta's Near-Term Sales but Long-Term Growth Intact; FVE Unchanged

Narrow-moat Anta posted decent operating data for the first quarter, but management painted a bleak picture for the second quarter as lockdowns severely impacted demand. We lower our 2022 revenue growth forecast to 10% from 19% to reflect short-term headwinds. We do not expect sales to normalize until the fourth quarter of 2022. Lower sales coupled with high fixed costs (more than 50% of operating expenses) will cripple margins, so we now expect net profit to decline by 3% this year. That said, we maintain our fair value estimate at HKD 171 as our long-term assumptions remain largely unchanged. We would treat volatility in the stock as an opportunistic entry point, but the absence of major changes to China’s zero-COVID-19 strategy could lead to further downward revisions to our near-term estimates.