ANTA Sports Products Ltd (SEHK:2020) has been one of the best growth stories in China. The local sportswear brand, which was established back in 1991, has seen a 20%-plus growth in profit to shareholders for each of the last six years.

Investors who were savvy enough to pick up shares just five years ago would be sitting on a 449% capital gain, plus dividends.

Three people running on a bridge in workout gear.

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Let's take a look at why ANTA has done so well and why I believe it can still continue producing market-beating returns for investors.

A force to be reckoned with

Over the last decade, the sportswear powerhouse has grown in prominence in China. The group's own ANTA sports brand is the number three player in China, just behind traditional powerhouses, Nike and Adidas, and ahead of other local brands such as Li Ning Co LtdXtep International Holdings Limited and 361 Degrees International.

ANTA's other brand, FILA, which it acquired the Chinese rights to in 2009, has also done well with the younger generation. Revenue from the ANTA brand and FILA surged 18.3% and 79.9% year-on-year, respectively, in the first half of 2019. 

Both brands also saw profit increase even faster than sales as gross profit margins widened 1.8 percentage points to 56.1%, demonstrating the group's formidable pricing power.

Strengthening its brand

ANTA's management has also been proactive in cementing its position as the number one local brand in China. ANTA is the official sportswear partner of the Chinese Olympic Committee and continues to sponsor Chinese national teams in a variety of sports.

Meanwhile, The ANTA Kids brand is also the first domestic brand to enter the market and has been well-received. The sportswear company is opening more than a hundred ANTA stores in the latter half of the year. These efforts will likely further the brand's visibility among consumers in China.

Riding on the domestic industry tailwinds

ANTA is well-positioned to ride on the coattails of the growing sportswear market. In its interim report, management was extremely positive citing a number of catalysts that could propel the sportswear market in the coming years. 

It said, "Major sporting events such as the Tokyo 2020 Olympic Games, the Beijing 2022 Olympic Winter Games and the 2022 World Cup Qatar are expected to become explosive growth catalysts for the sportswear market, providing unprecedented business opportunities over the next few years."

It is also worth noting, that despite the ongoing trade war, China's GDP is still expected to rise more than 6% annually over the next two years.

Valuation

With all that said, it is not surprising to see that ANTA Sports currently trades at a premium to the broader market. At the time of writing, it trades at 37x its trailing earnings and has a relatively low dividend yield of just 0.8%.

But don't let that deter you. The group's earnings are expected to grow quickly over the next few years and its price-to-forward earnings ratio is a much more palatable 24.3x. In addition, besides the factors mentioned above, ANTA also generates a healthy free cash flow every year and has a low payout ratio, which means it could increase its dividend down the road.

All things considered, I believe patient investors who are willing to pay a premium today will be well-rewarded in the long haul.

A version of this article originally appeared on our Fool Asia site. For more coverage like this head over to Fool.hk.en.