China sportswear Report Interpretation

Overview

This China sportswear read-across uses Yonex’s 1QFY27 results to assess demand for badminton and tennis in China. Nomura finds continued structural opportunity and market-share gains for Yonex, but notes that China growth has moderated and competitive investment is increasing.

Core views

Yonex delivered stronger-than-expected 1QFY27 results. Revenue rose 14.1% year on year to JPY45.4bn, ahead of Bloomberg consensus of JPY43.7bn, while operating profit increased 9.4% to JPY6.8bn. Higher sales-supported gross profit offset greater advertising and personnel expense, although operating margin declined 0.6 percentage points year on year to 15.1%. Net profit rose 31.9% to JPY5.5bn, helped by foreign-exchange gains and national subsidies. Management attributed the upside partly to stronger-than-expected sales to overseas distributors in Japan and tight SG&A control, and raised FY27 revenue, operating-profit and net-profit growth guidance to 10.6%, 14.2% and 17.4%, respectively, from 8.8%, 7.6% and 9.2% previously. The geographic and category data show broad-based expansion but a slower China-related growth trajectory. Japan, Asia, North America and Europe represented 38.4%, 52.2%, 4.9% and 4.1% of Yonex revenue, with 1QFY27 growth of 12.5%, 16.1%, 1.4% and 23.3%, respectively. Asia still grew faster than Yonex overall, but its 16.1% growth moderated from 26.2% in 4QFY26 and 39.1% in 1QFY26. In China specifically, management said badminton demand and sales momentum remained solid, but growth slowed after the exceptionally strong prior quarters; apparel and bags continued to grow. By sport, badminton, tennis, golf and other products accounted for 60.6%, 13.8%, 0.9% and 24.3% of revenue and recorded sales growth of 13.9%, 12.1%, 33.6% and 15.3%, respectively. Yonex said overseas momentum continued across categories, while its “Head-to-Toe” approach lifted footwear and apparel sales. In Japan, strong spring seasonal demand and new products supported tennis sales at the previous year’s high level. Nomura interprets the results as supporting structural growth opportunities in China’s emerging sports, particularly badminton and tennis, where Yonex is directly exposed and has continued to gain market share. However, these opportunities are also drawing additional investment and competitors, including FILA under ANTA and Li Ning. Within Nomura’s China sportswear coverage, ANTA remains the preferred name because of its longer-term exposure to running and outdoor activities, multi-brand strategy and valuation.

Analysis framework

Nomura starts with Yonex’s quarterly revenue, profit and guidance versus consensus, then examines regional and sport-category growth to assess the China demand read-across. It uses management commentary on China demand, product categories and market share to connect Yonex’s results to competitive conditions for listed China sportswear companies.

Methodology notes

• Industry AnalysisSupply-demand framework

  Demand and competitive read-across from Yonex’s China badminton and tennis performance.

  The report treats Yonex’s sales momentum, product demand and market-share gains as evidence of underlying demand in emerging sports, while considering the competitive response from domestic and global brands.

• Valuation methodsP/E and PEG Valuation

  Forward price-to-earnings multiple valuation for ANTA and Li Ning.

  Nomura states that ANTA’s HKD89.9 target price is based on 17.5x F12M P/E, while Li Ning’s HKD16.00 target is based on 13x F12M P/E.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• ANTA Sports Products (2020 HK)

  Nomura’s preferred China sportswear name; FILA is identified as a competitor investing in emerging sports.

  Strengths

  Long-term exposure to running and outdoor activities, multi-brand strategy and attractive valuation levels.

  Comparison

  Preferred over other names in Nomura’s China sportswear coverage; Li Ning is rated Neutral.

  Risks

  Intensifying domestic and global competition, slower-than-expected sales growth and weaker-than-expected macroeconomic dynamics.

• Li Ning (2331 HK)

  Covered China sportswear company and competitor investing in badminton and tennis-related opportunities.

  Strengths

  Potential upside from a stronger-than-expected recovery in basketball and sports-leisure segments and better performance in lower-tier cities.

  Comparison

  Rated Neutral, while ANTA is Nomura’s preferred China sportswear name.

  Risks

  Sluggish macroeconomic conditions and weaker-than-expected operating efficiency.

• Yonex (7906 JP)

  Read-across company whose China results inform the report’s sportswear-sector view.

  Strengths

  Continued China market-share gains in badminton and tennis, broad overseas category momentum and raised FY27 guidance.

  Weaknesses

  China and Asia growth have moderated from earlier high levels.

  Comparison

  Asia growth remained above overall company sales growth despite deceleration.

Key data

• Yonex 1QFY27 revenueJPY45.4bnUp 14.1% year on year and above Bloomberg consensus of JPY43.7bn.
• Yonex 1QFY27 operating profitJPY6.8bnUp 9.4% year on year; operating margin declined 0.6ppt to 15.1%.
• Yonex 1QFY27 net profitJPY5.5bnUp 31.9% year on year, benefiting from foreign-exchange gains and national subsidies.
• Asia revenue growth16.1% y-yDecelerated from 26.2% in 4QFY26 and 39.1% in 1QFY26.
• FY27 guidance growthRevenue 10.6%; operating profit 14.2%; net profit 17.4%Raised from prior guidance of 8.8%, 7.6% and 9.2%, respectively.

Impact & implications

The report argues that Yonex’s results reinforce the structural growth case for badminton and tennis in China, but the moderation in China growth and expanding competitive investment mean that the opportunity is not uniform across sportswear companies. Nomura’s stated preference remains ANTA.

Risks

• For ANTA, Nomura cites intensifying competition from domestic and global players, slower-than-expected sales growth and weaker macroeconomic conditions.
• For Li Ning, Nomura cites a sluggish macroeconomic environment and weaker-than-expected operating efficiency as downside risks.

What to watch

• Whether China badminton demand and Yonex sales momentum remain solid or slow further after the moderation seen in 1QFY27.
• Competitive investment by domestic and global brands in badminton and tennis.
• Execution of ANTA’s running, outdoor and multi-brand strategy.