When President Xi Jinping of China went to inspect the site of the 2022 Winter Olympics, he dressed for the occasion.
The president wore an Arc'teryx winter coat for his trip to the mountains north of Beijing, the South China Morning Post reported.
Xi's entourage wore heavy down and waterproof jackets that displayed the logo of Anta Group, China's No. 1 sportswear brand, an official sponsor of the 2022 games.
In 2019, Anta Group led a consortium that bought out Amer Sports of Helsinki for $5.2 billion.
Amer Sports, which held an initial public offering, or IPO, earlier this month, owns Arc'teryx, a Canadian outdoor apparel and equipment specialist, and the iconic sports brands Wilson and Salomon.
Wilson, founded in 1913, makes equipment for many sports, including baseball, badminton, football, basketball, tennis, and soccer. Movie fans may remember that a Wilson volleyball was Tom Hanks's best friend on a desert island in the 2000 film "Cast Away."
Salomon is a French sports equipment manufacturer founded in 1947. The company makes trail running, hiking, climbing, skiing, snowboarding, and other outdoor sports equipment.
Amer Sports AS had an underwhelming market debut on Feb. 1, selling 105 million shares at $13 each to raise $1.37 billion. It had earlier targeted a range of $16 to $18.
Amer says it has grown Greater China business
Amer also granted underwriters a 30-day option to purchase up to an additional 15.75 million shares to cover over-allotments.
The company disclosed that it generated more than S3.5 billion in 2022 and posted a 20.4% revenue compounded annual growth rate from 2020-2022.
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Amer Sports traded with a market cap of around $6.63 billion after its IPO debut. That makes it bigger than other sports-related companies such as Under Armour (UAA) , Acushnet Holdings (GOLF) , and Peloton Interactive (PTON) .
The company maintained that it has benefited from its connection to China, stating in a Securities and Exchange Commission filing that "we have leveraged key learnings from our long-term oriented owners to enhance our capabilities and performance in Greater China."
"As a result, we have grown our Greater China business significantly at a time when others were facing challenges or retrenching," the company said.
Some market observers suggested that Amer Sports connection to China might have weighed on investor sentiment when it went public.
"Potential shareholders seem uneasy about Amer Sports' growth opportunities being overly affected by its reliance on demand from China and therefore may want to discount its valuation," Michael Ashley Schulman, partner and chief investment officer at Running Point Capital Advisors, told Reuters at the time of the IPO.
Analysts show love for Amer Sports
Nevertheless, Wall Street analysts showed all sorts of love for Amer Sports on Feb. 26, after its post-IPO quiet period ended.
Evercore ISI assigned the highest price target, $21, to Amer, telling investors that it expected the company to benefit from Anta's deep knowledge of the Chinese market, helping it compete with North American and European brands in the country, Channel News Asia reported.
"I do believe that the Anta relation can assist them as they are familiar with the market and could aid them in localizing," Jessica Ramirez, senior analyst with the consulting firm Jane Hali & Associates, told the Singapore-based news outlet.
"I think Arc'teryx and Salomon are being well received by the market in China,” she said. “Both brands have been catering to the region with unique in-store experiences, products, and campaigns."
Analyst cites 'billion dollar brands'
Deutsche Bank kicked off coverage of the company with a buy rating and a $20 price target.
The firm said that it views Amer Sports as both a top-line and margin-expansion story, supported by "an inexpensive valuation and compelling sum-of-the-parts analysis that points to further share-price appreciation."
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Deutsche Bank said that few companies in its coverage hold the investment attributes that Amer exhibits: low-to-mid-teens revenue growth; meaningful earnings before interest and taxes; margin upside, and mid-to-high teens growth in .earnings before interest, taxes, depreciation, and amortization.
Citi initiated coverage of Amer Sports with a buy rating and a $19 price target.
The firm described the company as a diversified multi-brand portfolio company with three $1 billion brands: Arc’teryx, Salomon, and Wilson.
Citi sees potential upside in Amer's long-term targets of low- to mid-teens sales growth driven by upside in the Arc’teryx business.
In addition, both Salomon and Wilson are leaders in their categories with opportunities to grow in North America and internationally, Citi told investors.
TD Cowen initiated coverage of Amer Sports with an outperform rating and an $18 price target.
The firm favors "the durability, management team, and the improving competitive conditions" of the Arc’teryx, Salomon, and Wilson brands.
TD Cowen also said adjusted EBITDA expanding at 22% annually into fiscal 2027 and improving free-cash-flow conversion off trough levels are catalysts for creating value.
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