Tai Fu Securities: China'S Sports Apparel Industry Has A Bright Future.

In the 4 quarterly order meeting in 2010, the average order growth of XTEP International (1368.HK, $6.15) increased by 23%, while the growth rate of Lining (2331.HK, $27.15, Holdings) was the smallest. China's trend (3818.HK, $5.36, buy) and Anta sports (2020.HK, $14.78, Holdings) ranked second and three respectively, with an increase of about 20% and 19% respectively.

However, the four sports apparel suppliers received a common trend in the fourth quarter of 2010, indicating that distributors continue to have confidence in the sales prospects.

As in the third quarter of 2010, the order value of Lining's orders in the fourth quarter of 2010 also increased by 20%, but still lower than we expected.

After considering the first 3 orders of 2010, the annual sales increase should be about 17%.

In the fourth quarter of 2010, the value of footwear orders increased by about 9%, while clothing jumped by 29%.

The average selling price of footwear jumped 8%, while sales increased by 1%, while the average selling price and sales volume of clothing increased by 18% and 11% respectively.

In the long run, the company expects that the price gap between its footwear products and Nike and Adidas will be narrowed from 30-40% to 15-20%, which will help to increase gross margins.

The company expects that the number of new stores will reach 8000 by the end of 2010.

Our target price for the unit is 28.16 yuan, equivalent to 21.9 times earnings in 2010 or 0.9 times earnings growth over two years.

Anta's order performance in the fourth quarter of 2010 also improved compared with the third quarter of 2010. The value of orders increased by 25% over the year, and higher than the previous 3 sales exhibitions. The average selling price in the fourth quarter of 2010 also increased by more than 5%.

The main reasons for the latter increase are the improvement of product mix, the adoption of waterproof and antifouling materials and fabrics, and the introduction of insulation technology to enhance the function of winter sportswear.

The sales volume of the 4 orders increased by an average of about 19%.

As Anta sponsored the Chinese Olympic Committee in 2009-12, it is expected that the company will increase advertising and publicity expenses, which will further improve brand awareness.

By the end of 2009, Anta's financial position was steady, with a net cash of 4 billion yuan or 1.60 yuan per share.

Sponsoring the Chinese Olympic Committee and the 2010 Asian Games held in Guangzhou in November should help further enhance the brand image.

Our target price for the unit is 15 yuan, which is equivalent to 21.9 times the expected price earnings ratio in 2010, or calculated at the compound annual growth rate of 21.5% of the estimated earnings per share in 2009-11, equivalent to 1 times earnings growth.