CHINA SPORTING GOODS : Key Takeaways from Yue Yuen/Pou Sheng Call

Research evidence excerpt

CHINA SPORTING GOODS : Key Takeaways from Yue Yuen/Pou Sheng Call

Investment case, valuation and risks

AMER SPORTS INC (Outperform, Target Price USD63)

Investment case

There are structural and Company-specific growth drivers across AS's brands that give

us confidence in sustainable double digit revenue growth for years to come. This is

especially true of the Arc'teryx and Salomon brands which we see scaling to each

become multi-$bn brands through geographic, channel, and category expansion.

Margin expansion will be driven by higher growth Arc'teryx revenue mix and Salomon

continuing to scale its high margin footwear offering. We believe that EBITDA and

earnings can sustainably grow >20% annually. Post-IPO leverage is manageable, and

debt reduction could be accelerated with the sale of Wilson.

Valuation methodology

We value Amer Sports using a SOTP approach. We apply FY26E EV/EBITDA multiples

of 30x, 30x, and 10x to the Technical Apparel, Outdoor Performance, and Ball & Racquet

segments, respectively. This equates to a blended multiple of ~29x at the company level

vs our FY26E consolidated adjusted EBITDA of $1,355m. Our adjusted EBITDA

calculation excludes IFRS 16 D&A and lease interest expense to be more comparable

with our coverage set.

Risks

To the upside:

The Salomon brand has scaled its footwear offering to >$1bn in FY24 and has been

growing at a ~25% CAGR for several years. There is runway for continued growth at this

pace, which would drive upside to the Outdoor Performance segment. Further, the

Arc'teryx brand should drive growth above the 20% algo for the Technical Apparel

segment as it opens more stores and expands into North America.

To the downside:

Amer has outsized exposure to China (25% of revenue) which is concentrated in the