What Is The Secret Of Anta'S Sports Performance Improvement?

With the rapid cash conversion cycle showing signs of improvement, other sporting goods companies are still struggling in the quagmire of high inventory.

For investors, how do we find a turning point in an industry? Are there any specific indicators to enlighten us?

At present, there are 6 mainland sporting goods companies listed in Hongkong, including

China sports, Anta sports, 31st degree, PEAK sports and

The share prices of the international stocks began to decline from around October 2010, and until 2015, other than Anta sports, other stocks fell by more than 40% compared with before October 2010.

Take the June 10, 2015 stock price as an example, compared with the stock price at the high point in 2010, Lining fell 87%, China's trend fell 62%, 331 degrees fell 55%, PEAK sports fell 43%, XTEP international fell 50%.

This is obviously an industry problem. In fact, in recent years, there have been reports on high storage and storage of sports goods companies in financial media.

Obviously, after 5 years of inventory clearance, the sporting goods industry has not yet come out of the doldrums.

For investors, how do we find a turning point in an industry? Are there any specific indicators to enlighten us?

Operating cash flow is an important indicator.

Sporting goods industry is a typical industry with overcapacity and homogeneous competition. Before 2010, the growth rate of the whole industry was obvious. All companies enjoyed the growth bonus of the industry. Hello, everyone.

When the market demand was balanced in 2010, the problem of overcapacity in the whole industry began to appear.

Which indicators can show these problems?

We take China's trend as an example to analyze.

The main trend of China is to sell KAPPA brand in Greater China, founded by former Lining general manager Chen Yihong.

From 2007 to 2010, China's revenue grew from 1 billion 711 million yuan to 3 billion 320 million yuan, 3 billion 970 million yuan and 4 billion 260 million yuan. In fact, in 2010, compared with 2009, its revenue growth has been rather weak, and only 7.3% of its revenue growth was achieved in that year.

Compared with the nearly 100% growth of the company in the past two years, this can be said to be one of the obvious signs of the turning point of its performance.

Most importantly, the trend of China's revenue deviates from accounts receivable and net cash inflow.

We can see this trend from the mid-term report of the company in 2010.

In August 25, 2010, China released its mid term earnings report. The company's revenue in the half year was 2 billion 150 million yuan, an increase of 14.8% over the same period last year, and accounts receivable increased by 410 million yuan, an increase of 74% over the same period last year.

The growth of accounts receivable is totally out of proportion to the growth of company revenue, indicating that the company has already begun to send large quantities of goods to the distributors in order to complete the sales, but these confirmed revenues are only converted into accounts receivable, and the company has not received cash.

By March 22, 2011, when China released the annual performance in 2010, the company's revenue growth was not only seriously out of line with the growth of accounts receivable, but also the net operating cash flow fell 2.73% year-on-year.

If we keep track of the stock market in China for a long time, we can find out that the company's revenue growth has been seriously deviated from the growth of accounts receivable and the net cash flow from operation in the interim report in 2010. This divergence is a significant sign of the turning point of the company's performance.

In order to complete the expectation of capital market, the company began to sell more products to dealers. However, in the terminal market, these products are not sold, and dealers will hardly have cash to pay to the company. The policy of packing channels will not last, and revenues will continue to grow. Accounts receivable will continue to grow. This will lead to a stagnant or even negative growth of net cash flow from operating companies, and the worst case is the net outflow of cash flow from operating companies.

If we combined with the other sports products company's financial report, we will find that this phenomenon is not unique to China, but the whole sports industry is in the same way.

The industry inflection point appeared, facing a product homogenization serious, overcapacity, no moat industry, this time should not hesitate to sell.

This is also true of the sporting goods industry.

Anta is ahead of the cash conversion cycle.

5 years later, the sporting goods industry still can not get out of the cold winter. But in the 6 sporting goods companies listed in Hong Kong, only Anta Sports 1 companies' share price surpassed the high level in 2010. How can Anta lead the industry? In addition to the same store sales and orders will be beautiful, there is actually a core indicator to find out why Anta can win other sporting goods shares, which is the cash conversion cycle.

A formula is used to show that cash conversion cycle = (accounts receivable turnover days + inventory turnover days) - accounts payable turnover days.

From the perspective of cash conversion cycle, in fact, all enterprises are facing the same problem.

The manufacturing industry first buys the raw materials, then processes the finished products, and finally sells the cash. The banking industry first deposits the deposits from the depositors, then adds interest to the users who need the money. Finally, the principal and interest are recovered from the users.

All industries are faced with the pformation process of cash from the source of operation to the end. In this process, in addition to earning profits and how to cash the cash quickest, it will reflect the competitiveness of an enterprise. The shorter the cash conversion cycle of a company, the better the business operation. The longer the cash conversion cycle is, the worse the operation of the enterprise will be.

The cash conversion cycle reflects the advantages and disadvantages of the business mode and the negotiation ability between the enterprise and the upstream and downstream businesses. The shorter the cash conversion cycle is, the greater the advantage of the enterprises is, and the bargaining power of the suppliers is enhanced. The capital and cost of the inventory and accounts receivable are pferred to the suppliers. In essence, the enterprises make money from the suppliers' money. If the enterprise's cash conversion cycle is negative, the enterprise is equivalent to the free use of suppliers' money to do business, and the money is still generating interest. We all know that cash is sometimes valuable.

Let's talk about the comparison of sporting goods shares again. According to the annual report in 2014, the cash conversion cycle of Anta sports is 39 days, China's trend is 127 days, Lining is 96 days, the 331 degree is 70 days, PEAK sports is 147 days, XTEP international is 77 days.

Visible, cash conversion cycle data, Anta threw other sports products companies out of a few streets, which is the core reason for Anta's share price.

Cash conversion cycle data, a lot of retail oriented companies will inform investors in the earnings report, you can easily get companies in the same industry, even if the whole industry is in a low ebb tide, you can also find good companies in this bad industry. There are many industries with overcapacity and fierce competition, such as steel, glass, clothing and so on. These industries are not at the draught, and the whole industry looks bleak, but this does not prevent us from finding treasure in it, and finding good companies in bad industries often makes your profits outperform the market.