Investment Rating - The report maintains a "Positive" outlook on the textile and apparel industry, highlighting potential investment opportunities in specific segments such as non-woven fabrics and sportswear [2][9]. Core Insights - The textile and apparel sector underperformed the market, with the SW textile and apparel index rising by 0.7%, lagging behind the SW All A index by 1.5 percentage points [4][6]. - Recent industry data indicates a 2.9% year-on-year increase in retail sales for clothing, shoes, and textiles, totaling 837.1 billion yuan from January to July [30]. - Exports of textiles and apparel decreased by 0.3% year-on-year, amounting to 197.27 billion USD from January to August, with a notable 5.0% decline in August alone [30][31]. Summary by Sections Textile Sector - Focus on investment opportunities in the entire non-woven fabric supply chain, with a significant weekly increase of 26% for Yanjiang Co. The production of non-woven fabrics has been declining since its peak in 2020, but the pandemic has heightened hygiene awareness, maintaining a large market scale [9][12]. - Yanjiang Co. has a global production footprint in China, Egypt, the USA, and India, with major clients including Procter & Gamble and Kimberly-Clark, contributing significantly to its revenue [9][12]. - The report recommends Nobon Co. for its growth potential in personal care and new tobacco products, highlighting its strong market position and technological capabilities [10][12]. Apparel Sector - Jiangnan Buyi reported a stable growth in its latest annual report, with a 4.6% increase in revenue to 5.55 billion yuan and a 6.0% rise in net profit to 900 million yuan for FY25 [12][19]. - The sportswear segment shows resilience, with brands like Anta and Li Ning demonstrating strong performance despite market challenges, with Anta's revenue increasing by 14% year-on-year [13][19]. - The report emphasizes the importance of domestic demand recovery in 2025, suggesting that high-quality domestic brands are poised for a turnaround [10][12]. Market Trends - The report notes a K-shaped recovery in retail, with high-end and cost-effective brands performing better. Innovations in retail formats are accelerating, with plans for significant store expansions in the coming year [13][19]. - The textile manufacturing sector is expected to benefit from favorable trade conditions, particularly for manufacturers with strong supply chain capabilities [10][12].

Investment Rating - The report maintains a "Buy" rating for several key companies in the textile and apparel industry, including Anta Sports, Li Ning, and Xtep International, with respective 2025 PE ratios of 18x, 18x, and 12x [11][39]. Core Insights - The textile and apparel industry is experiencing a shift in export dynamics due to changes in U.S. tariff policies, leading to a decline in imports from China and an increase from Southeast Asian countries [2][25]. - Major apparel manufacturers reported mixed revenue results for August 2025, with declines for companies like Yuanyuan Group and Ruo Hong, while Feng Tai showed month-on-month improvement [1][16]. - The report anticipates a recovery in orders for upstream manufacturers if the operational performance of core brands like Nike improves, particularly in the Greater China market [3][32]. Summary by Sections Industry Overview - The textile and apparel sector has seen a decline in U.S. imports from China, with a 23% year-on-year drop from January to July 2025, while imports from Vietnam, India, Bangladesh, and Cambodia increased by 18%, 16%, 22%, and 24% respectively [2][25]. - China's apparel exports from January to August 2025 totaled $102.8 billion, down 1.7% year-on-year, while textile yarn and fabric exports increased by 1.6% to $94.51 billion [2][25]. Company Performance - Nike's revenue for FY2025 showed significant declines across all quarters, with a drop of 10.4% in Q1 and 12.0% in Q4, but the company expects a narrowing of revenue decline in FY2026 [3][32]. - Key manufacturers like Shenzhou International and Huayi Group reported revenue growth of 15% and 10% respectively for the first half of 2025 [10][33]. Market Trends - The report highlights a cautious consumer environment, with the sports footwear segment expected to outperform the overall apparel market, maintaining a healthy inventory turnover ratio of 4-5 [3][36]. - The jewelry sector is also noted for its focus on product differentiation and brand strength, with companies like Chow Tai Fook and Chao Hong Ji recommended for their improving product and channel efficiencies [4][38]. Investment Recommendations - The report recommends Shenzhou International for its low exposure to U.S. business and strong profitability, with a 2025 PE of 13x, and Huayi Group for its expanding international capacity, with a 2025 PE of 18x [38]. - In the sportswear segment, Anta Sports and Li Ning are highlighted for their robust operational capabilities, both with a 2025 PE of 18x [39].

Core Viewpoint - The PU sole industry in China is experiencing significant growth, with the market size expected to reach 1.38 trillion yuan in 2024, a 15% increase year-on-year, and projected to reach 1.8 trillion yuan by 2025 due to rising consumer demand for high-quality products and the rapid development of e-commerce [1][7]. Group 1: Industry Overview - The PU sole is made from polyurethane, offering advantages such as lightweight, durability, and improved performance compared to traditional rubber soles [3][5]. - The industry has evolved through three stages: initial development (1980-1990), rapid expansion (1990-2000), and maturity (2010-present), with China becoming the largest producer and consumer of PU soles globally [4][5]. Group 2: Market Dynamics - The PU sole market is characterized by intense competition, with both international giants like Lubrizol and domestic companies such as Huafeng Chemical and Anli Materials actively participating [9][10]. - The production process involves various methods, including low-pressure and high-pressure casting, which contribute to the quality and performance of the soles [4]. Group 3: Industry Trends - Technological innovation is driving product upgrades, with advancements in materials science leading to enhanced functionality, such as improved wear resistance and adaptability to environmental conditions [10][11]. - There is a growing demand for eco-friendly and sustainable PU sole materials, with companies increasingly focusing on the use of bio-based and recycled materials [11][12]. - The trend towards personalized products is rising, particularly among younger consumers, prompting companies to explore customization options and data-driven design solutions [12].

Core Insights - The sports footwear industry is essential for daily life, with designs tailored for various sports and everyday use, emphasizing cushioning and shock absorption [1] Group 1: Business Models in the Sports Footwear Industry - The industry has developed two main business models: 1. Separation of brand operation and manufacturing, where brands like Nike and Adidas focus on brand value and marketing while outsourcing production to specialized manufacturers [1] 2. Integrated brand operation and manufacturing, where companies like Guirenniao and Wanlima handle both branding and production, although some outsourcing occurs [1] Group 2: Market Size and Forecast - The global sports footwear market is projected to grow from 570.5 billion in 2020 to 935.6 billion in 2023, with a compound annual growth rate (CAGR) of 2.4% from 2019 to 2023, and expected to exceed 1,400 billion by 2028 [2] - The global sports footwear manufacturing market is expected to grow from 134 billion in 2019 to 186.9 billion in 2023, with a CAGR of 8.7%, and is projected to surpass 280 billion by 2028 [5] - The Chinese sports footwear manufacturing market is anticipated to grow from 23.4 billion in 2019 to 47.8 billion in 2023, with a CAGR of 19.6%, and is expected to exceed 70 billion by 2028 [5] Group 3: Industry Trends - There is a deepening partnership between leading sports brands and specialized manufacturers, with brands relying on quality manufacturers for production while manufacturers depend on brand orders for growth [8] - The automation level in sports footwear production is increasing due to rising labor costs, enhancing efficiency and quality while reducing costs [9][10] Group 4: Competitive Landscape - The sports footwear manufacturing industry is highly concentrated in Asia, with Taiwanese manufacturers gaining a competitive edge during the industry shift, leveraging technology and production quality [11] - Chinese brands like Anta, Li Ning, and Peak are emerging strongly, supported by a mature supply chain and deepening collaborations with international brands [11]

Core Viewpoint - The 16th China Food Safety Forum emphasized the importance of continuously improving the national food safety standard system to ensure safety and promote development [1][2]. Group 1: Food Safety Standards - Since the implementation of the Food Safety Law in 2009, China has published a total of 1,725 national food safety standards covering over 340 food categories and more than 20,000 indicators [1]. - The standards address major health hazards affecting Chinese residents and manage the entire food supply chain from production to consumption [1]. Group 2: New Standards and Regulations - This year, 126 new standards and amendments were released, focusing on limits for harmful substances in food, hygiene regulations, and nutritional labeling, among others [2]. - The new standards aim to meet public expectations for food safety and support the urgent needs of food industry transformation and regulatory efficiency [2]. Group 3: Labeling Innovations - The new General Principles for Prepackaged Food Labels and Nutritional Labels introduce mandatory allergen labeling, standardized quantitative labeling, and digital labeling, enhancing transparency and consumer protection [3]. - The nutritional labels will now include additional information on saturated fats and sugars, promoting healthier food choices and reducing food waste [3]. Group 4: Digital Labeling - The National Health Commission and the State Administration for Market Regulation have announced measures to promote digital labeling, simplifying information access for consumers and enhancing regulatory oversight [4]. - Hundreds of companies and over a thousand products have already adopted digital labels, covering major food categories such as dairy, meat, and beverages [4].

Group 1 - The "pain culture" consumption trend is gaining momentum, with brands like Converse, LEE, Dickies, and Li Ning increasing their focus on pain bags to attract young consumers [1][2] - Pain bags differ from regular bags primarily due to a transparent compartment designed for displaying merchandise, rooted in Japanese "pain bag culture" where fans showcase their favorite badges [1][2] - The market for pain bags is becoming concentrated, with over ten sports brands, including Adidas and Anta, participating, and prices generally range from 100 to 200 yuan, with some single items selling over a thousand units [1][2] Group 2 - New products are being launched in the pain bag market, such as Converse's white backpack with a large transparent compartment and Skechers' concert-specific pain bag [2] - The influence of "pain culture" is extending beyond bags, with brands exploring DIY options in footwear and clothing, enhancing the emotional connection with consumers [2] - Industry experts note that the Z generation seeks emotional value over mere functionality, suggesting brands should adopt interactive systems and customization options to meet these demands [2]

Core Insights - The importance of the "14th Five-Year Plan": The upcoming "14th Five-Year Plan" is expected to significantly impact China's economic and social development over the next five years, shifting focus from production to a balance between production and consumption due to the current issue of insufficient effective demand [1] - Strengthening consumption policies: Starting in 2024, consumption policies will be significantly enhanced, including the allocation of special government bond funds to support consumption upgrades. Continued funding is expected in 2025 and 2026 [1] - Potential of service consumption: China's service consumption still lags behind developed economies, indicating a substantial opportunity for growth in this sector to stimulate consumer interest and optimize the consumption environment [1] - Rise of technology consumption: With a rapid technological development and an engineering talent surplus, products like robotic vacuum cleaners and drones are gaining market attention, likely creating new consumer demand [1] - Optimization of the overall consumption mechanism: Measures such as consumption tax reform will encourage local governments to transition from production-oriented to service-oriented, promoting the internationalization of quality consumption companies and enhancing residents' consumption capacity [1] Investment Recommendations - Food and Beverage: Recommended companies include Dongpeng Beverage and Lihigh Food, with a focus on Youran Dairy and Bairun Co [2] - Service Sector: Recommended companies include Guming, Mixue Group, and Bubugao, with a focus on Zhongsheng Holdings [2] - Light Industry: Companies to watch include Hengfeng Paper and Xilinmen [3] - Trendy Toys: Recommended companies include Pop Mart and Blokus [4] - Home Appliances: Recommended companies include Midea Group, Haier Smart Home, TCL Electronics H, Roborock, and Ecovacs, with a focus on Yingshi Innovation [5] - Agriculture: Recommended companies include Zhongchong Co, Petty Co, Muyuan Foods, and Haida Group [11] - Textile and Apparel: Recommended companies include Anta Sports, Xtep International, 361 Degrees, and Hailan Home, with a focus on Li Ning and Sanfu Outdoor [11] Report Content Analysis - Expanding consumption share: The report emphasizes that expanding consumption share is essential for achieving Chinese-style modernization, as China's consumption rate is significantly lower than that of developed countries [9] - Shift in fiscal spending: During the "14th Five-Year Plan" period, fiscal spending will shift from material investments to human capital investments, increasing support for education, healthcare, and housing [9] - Promotion of common prosperity: The report highlights the need for income distribution reform and the promotion of the Zhejiang common prosperity model to achieve balanced development [9] - Consumption tax reform: The report suggests that consumption tax reform will help local governments transition from production-oriented to service-oriented, enhancing the consumption environment [9] - Transition from traditional to new consumption: The report analyzes the maturation of traditional consumption markets and the rise of new consumption, which is characterized by a focus on quality and personal satisfaction [9] - Stimulating interest in service consumption: The report indicates that the shift from physical to service consumption is crucial for expanding domestic demand, with growing demand for events and performances benefiting local consumption [9]

(Incorporated in the Cayman Islands with limited liability) （於開曼群島註冊成立之有限公司） Stock Codes: 2331 (HKD counter) and 82331 (RMB counter) 股份代號：2331 (港幣櫃台) 及 82331 (人民幣櫃台) Dear Non-registered Shareholder (Note) As a non-registered shareholder, if you wish to receive Corporate Communications from the Company pursuant to the Listing Rules, you should liaise with your bank(s), broker(s), custodian(s), nominee(s) or HKSCC Nominees Limited through which your shares are held (collectively, the "Intermediaries") and pro ...

(Incorporated in the Cayman Islands with limited liability) （於開曼群島註冊成立之有限公司） Stock Codes: 2331 (HKD counter) and 82331 (RMB counter) 股份代號：2331 (港幣櫃台) 及 82331 (人民幣櫃台) Pursuant to Rule 2.07A of the Rules Governing The Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules") under the expansion of paperless listing regime and electronic dissemination of corporate communications that came into effect on 31 December 2023, the Company is writing to inform you that the Company has ado ...

[About Li Ning Group](index=2&type=section&id=%E9%97%9C%E6%96%BC%E6%9D%8E%E5%AF%A7%E9%9B%86%E5%9C%98) Li Ning Group is a leading Chinese sports brand enterprise, focusing on professional and casual sportswear, equipment, and accessories, with a comprehensive operational ecosystem [Company Overview](index=2&type=section&id=2.1%20%E5%85%AC%E5%8F%B8%E6%A6%82%E8%A7%88) Li Ning Company Limited is a leading Chinese sports brand, specializing in professional and casual sportswear, equipment, and accessories, with robust R&D, design, and distribution capabilities - Li Ning Company Limited is a leading Chinese sports brand enterprise, primarily engaged in professional and casual sports footwear, apparel, equipment, and accessories under the Li Ning brand[4](index=4&type=chunk)[5](index=5&type=chunk) - The Group possesses comprehensive R&D, design, manufacturing, marketing, distribution, and retail management capabilities, supported by an extensive retail distribution network and supply chain management system in China[4](index=4&type=chunk)[5](index=5&type=chunk) - In addition to its core Li Ning brand, the Group also operates Double Happiness table tennis products, AIGLE outdoor sports products, and Kason badminton products[4](index=4&type=chunk)[5](index=5&type=chunk) [Company Information](index=4&type=section&id=2.2%20%E5%85%AC%E5%8F%B8%E8%B3%87%E6%96%99) Key company information includes board members, committee structures, registered and operational offices, auditor, legal counsel, and principal bankers - Board members include Executive Directors Li Ning (Executive Chairman and Co-CEO), Takeshi Kosaka (Co-CEO), Li Qilin, and Independent Non-executive Directors Koo Fook Sun, Wang Ya Fei, Chan Chun Bun, and Wang Ya Juan[7](index=7&type=chunk) - The Audit Committee is chaired by Koo Fook Sun, the Remuneration Committee by Wang Ya Fei, and the Nomination Committee by Li Ning[7](index=7&type=chunk) - The company's registered office is in the Cayman Islands, its principal place of business in Hong Kong is on Electric Road, Fortress Hill, and its operational headquarters is in Beijing, China[7](index=7&type=chunk)[8](index=8&type=chunk) - The auditor is Ernst & Young, and legal counsel includes Messrs. Yeung & Chung, Solicitors LLP (Hong Kong law) and Tahota Law Firm (Mainland China law)[9](index=9&type=chunk) [Five-Year Financial Summary](index=8&type=section&id=%E4%BA%94%E5%B9%B4%E8%B2%A1%E5%8B%99%E6%91%98%E8%A6%81) This section summarizes Li Ning Group's key financial data from 2021 to H1 2025, including turnover and profit attributable to equity holders, highlighting half-year and full-year trends H1 2021-2025 Turnover and Profit Attributable to Equity Holders (RMB Million) | Indicator | H1 2025 | H1 2024 | H1 2023 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | :--- | :--- | | Turnover | 14,817 | 14,345 | 14,019 | 12,409 | 10,197 | | Profit Attributable to Equity Holders | 1,737 | 1,952 | 2,121 | 2,189 | 1,066 | - H1 2025 turnover was **RMB 14,817 million**, an increase from H1 2024's RMB 14,345 million[13](index=13&type=chunk) - H1 2025 profit attributable to equity holders was **RMB 1,737 million**, a decrease from H1 2024's RMB 1,952 million[13](index=13&type=chunk) [Management Discussion and Analysis](index=9&type=section&id=%E7%AE%A1%E7%90%86%E5%B1%A4%E8%A8%8E%E8%AB%96%E8%88%87%E5%88%86%E6%9E%90) This section analyzes the Group's financial performance, business operations, and future outlook for the reporting period [Financial Review](index=9&type=section&id=3.1%20%E8%B2%A1%E5%8B%99%E5%9B%9E%E9%A1%A7) H1 2025 saw revenue grow 3.3% to RMB 14.817 billion, but profit attributable to equity holders declined 11.0% to RMB 1.737 billion, impacted by lower gross margin, higher tax rates, and increased administrative expenses H1 2025 Key Operating and Financial Indicators (RMB Thousand) | Indicator | H1 2025 | H1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 14,816,763 | 14,345,288 | 3.3 | | Gross Profit | 7,414,803 | 7,235,602 | 2.5 | | Operating Profit | 2,438,485 | 2,401,895 | 1.5 | | Profit Attributable to Equity Holders | 1,737,422 | 1,952,032 | (11.0) | | Basic Earnings Per Share (RMB cents) | 67.43 | 75.80 | (11.0) | | Gross Profit Margin (%) | 50.0 | 50.4 | -0.4pp | | Operating Profit Margin (%) | 16.5 | 16.7 | -0.2pp | | Effective Tax Rate (%) | 33.3 | 25.3 | +8.0pp | | Profit Margin Attributable to Equity Holders (%) | 11.7 | 13.6 | -1.9pp | | Return on Equity Attributable to Equity Holders (%) | 6.5 | 7.8 | -1.3pp | | Staff Costs to Revenue Ratio (%) | 7.7 | 8.5 | -0.8pp | | Advertising and Marketing Expenses to Revenue Ratio (%) | 9.0 | 8.7 | +0.3pp | | Research and Product Development Expenses to Revenue Ratio (%) | 2.3 | 2.2 | +0.1pp | | Average Inventory Turnover Days | 61 | 62 | -1 day | | Average Trade Receivables Turnover Days | 14 | 15 | -1 day | | Average Trade Payables Turnover Days | 44 | 46 | -2 days | | Debt to Equity Ratio (%) (2025/06/30 vs 2024/12/31) | 35.4 | 36.8 | -1.4pp | | Net Asset Value Per Share (RMB cents) (2025/06/30 vs 2024/12/31) | 1,054.73 | 1,013.56 | +41.17 cents | - Revenue increased by **3.3%** year-on-year to **RMB 14.817 billion**, primarily driven by a **7.4%** increase in e-commerce channel revenue and a **4.4%** increase in franchised dealer revenue[17](index=17&type=chunk) - Retail channel revenue decreased by **3.4%** year-on-year, mainly due to adjustments in directly operated store layouts and shifts in consumption scenarios[17](index=17&type=chunk) - Gross profit margin decreased by **0.4 percentage points** to **50.0%**, primarily due to channel structure adjustments (lower proportion of direct-to-consumer channel revenue) and intensified promotional competition in directly operated stores[23](index=23&type=chunk) - Administrative expenses increased by **0.5 percentage points** year-on-year to **5.2%**, mainly due to the full impairment of goodwill of **RMB 72.387 million** from the acquisition of Kason brand in 2009, recognized in the current period[25](index=25&type=chunk)[26](index=26&type=chunk) - The effective tax rate significantly increased to **33.3%** (2024: 25.3%), primarily due to comprehensive factors such as exchange rate fluctuations and capital yield rates, leading to the provision for withholding income tax[31](index=31&type=chunk) - Net cash generated from operating activities decreased year-on-year, mainly due to reduced collections from lower retail revenue and increased tax payments[36](index=36&type=chunk)[37](index=37&type=chunk) - As of June 30, 2025, cash and cash equivalents amounted to **RMB 11.798 billion**, a net increase of **RMB 4.299 billion** from the end of 2024[36](index=36&type=chunk) [Revenue Breakdown](index=11&type=section&id=3.1.1%20%E6%94%B6%E5%85%A5%E6%98%8E%E7%B4%B0) H1 2025 revenue grew 3.3%, driven by footwear and equipment sales, while apparel revenue slightly declined, with e-commerce and franchised dealers showing strong growth Revenue Breakdown by Product Category (RMB Thousand) | Product Category | 2025 | % of Total Revenue | 2024 | % of Total Revenue | Revenue Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | | Footwear | 8,230,716 | 55.6 | 7,844,159 | 54.7 | 4.9 | | Apparel | 5,192,797 | 35.0 | 5,375,222 | 37.5 | (3.4) | | Equipment & Accessories | 1,393,250 | 9.4 | 1,125,907 | 7.8 | 23.7 | | Total | 14,816,763 | 100.0 | 14,345,288 | 100.0 | 3.3 | Percentage of Revenue by Sales Channel | Sales Channel | 2025 % of Revenue | 2024 % of Revenue | Change (%) | | :--- | :--- | :--- | :--- | | Sales to Franchised Dealers | 46.5 | 46.0 | 0.5 | | Direct Operating Sales | 22.8 | 24.4 | (1.6) | | E-commerce Channel Sales | 29.0 | 27.9 | 1.1 | | Other Regions | 1.7 | 1.7 | – | | Total | 100.0 | 100.0 | – | Revenue Breakdown by Region (RMB Thousand) | Region | 2025 | % of Revenue | 2024 | % of Revenue | Revenue Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | | North | 7,034,893 | 47.5 | 6,841,952 | 47.7 | 2.8 | | South | 7,531,794 | 50.8 | 7,255,024 | 50.6 | 3.8 | | Other Regions | 250,076 | 1.7 | 248,312 | 1.7 | 0.7 | | Total | 14,816,763 | 100.0 | 14,345,288 | 100.0 | 3.3 | [Cost of Sales and Gross Profit](index=12&type=section&id=3.1.2%20%E9%8A%B7%E5%94%AE%E6%88%90%E6%9C%AC%E5%8F%8A%E6%AF%9B%E5%88%A9) H1 2025 cost of sales was RMB 7.402 billion, resulting in a 50.0% gross profit margin, a 0.4 percentage point decrease due to channel adjustments and direct retail competition - Total cost of sales was **RMB 7,401,960,000** (2024: RMB 7,109,686,000)[23](index=23&type=chunk) - Overall gross profit margin was **50.0%** (2024: 50.4%), a year-on-year decrease of **0.4 percentage points**[23](index=23&type=chunk) - The decline in gross profit margin was primarily due to channel structure adjustments (decreased revenue proportion from direct-to-consumer channels) and intensified promotional competition in directly operated stores, leading to increased discounts by the Group[23](index=23&type=chunk) [Selling and Distribution Expenses](index=12&type=section&id=3.1.3%20%E9%8A%B7%E5%94%AE%E5%8F%8A%E7%B6%93%E9%8A%B7%E9%96%8B%E6%94%AF) H1 2025 selling and distribution expenses were RMB 4.293 billion, 29.0% of revenue, a 0.8% decrease, driven by closing inefficient stores and strategic marketing investments - Total selling and distribution expenses were **RMB 4,292,730,000** (2024: RMB 4,326,883,000), representing **29.0%** of total revenue (2024: 30.2%)[24](index=24&type=chunk) - Selling and distribution expenses decreased slightly by **0.8%** compared to the same period last year, primarily by reducing operating costs through closing inefficient directly operated stores[24](index=24&type=chunk) - To strengthen brand competitiveness and long-term growth momentum, the company strategically increased marketing investments, focusing on sports marketing and high-end brand building[24](index=24&type=chunk) [Administrative Expenses](index=13&type=section&id=3.1.4%20%E8%A1%8C%E6%94%BF%E9%96%8B%E6%94%AF) H1 2025 administrative expenses were RMB 777 million, 5.2% of revenue, a 0.5 percentage point increase, primarily due to the full impairment of RMB 72.387 million goodwill from the 2009 Kason acquisition - Total administrative expenses were **RMB 776,642,000** (2024: RMB 680,297,000), representing **5.2%** of total revenue (2024: 4.7%), a year-on-year increase of **0.5 percentage points**[25](index=25&type=chunk) - The increase in administrative expenses was mainly due to the full impairment of goodwill of **RMB 72,387,000** arising from the acquisition of Kason brand in 2009, recognized in the current period[26](index=26&type=chunk) [Share of Profits of Joint Ventures and Associates](index=13&type=section&id=3.1.5%20%E4%BA%AB%E6%9C%89%E5%90%88%E7%87%9F%E4%BC%81%E6%A5%AD%E5%8F%8A%E8%81%AF%E7%87%9F%E5%85%AC%E5%8F%B8%E7%9A%84%E6%BA%A2%E5%88%A9%E4%BB%BD%E9%A1%8D) H1 2025 share of profits from joint ventures and associates increased to RMB 134 million from RMB 111 million in the prior year - Share of profits of joint ventures and associates was **RMB 133,724,000** (2024: RMB 110,860,000)[27](index=27&type=chunk) [EBITDA](index=13&type=section&id=3.1.6%20%E6%81%AF%E7%A8%85%E5%89%8D%E5%88%A9%E6%BD%A4%E5%8A%A0%E6%8A%98%E8%88%8A%E5%8F%8A%E6%94%A4%E9%8A%B7(EBITDA)) H1 2025 EBITDA for the Group increased by 2.0% year-on-year to RMB 3.513 billion - Earnings before interest, tax, depreciation, and amortization (EBITDA) was **RMB 3,512,607,000** (2024: RMB 3,443,608,000), a year-on-year increase of **2.0%**[28](index=28&type=chunk) Reconciliation of EBITDA to Profit for the Period (RMB Thousand) | Item | 2025 | 2024 | | :--- | :--- | :--- | | Profit for the period | 1,737,422 | 1,952,032 | | Income tax expense | 869,094 | 661,098 | | Finance income | (193,993) | (221,238) | | Finance expenses | 159,686 | 120,863 | | Depreciation of property, plant and equipment | 344,022 | 470,250 | | Impairment of property, plant and equipment | 48,430 | 18,389 | | Amortisation of land use rights and intangible assets | 33,236 | 31,145 | | Impairment of intangible assets - trademark rights | 4,041 | – | | Depreciation of right-of-use assets | 250,817 | 319,210 | | Impairment of right-of-use assets | 104,311 | 50,820 | | Depreciation of investment properties | 49,603 | 41,039 | | Impairment of investment properties | 105,938 | – | | EBITDA | 3,512,607 | 3,443,608 | [Net Finance Income](index=14&type=section&id=3.1.7%20%E8%9E%8D%E8%B3%87%E6%94%B6%E5%85%A5%EF%BC%8D%E6%B7%A8%E9%A1%8D) H1 2025 net finance income decreased to RMB 34.307 million, mainly due to higher exchange losses and reduced interest income from lower rates - Net finance income was **RMB 34,307,000** (2024: RMB 100,375,000)[30](index=30&type=chunk) - The year-on-year decrease in net finance income was primarily due to increased exchange losses and lower interest income resulting from declining interest rates in the current period[30](index=30&type=chunk) [Income Tax Expense](index=14&type=section&id=3.1.8%20%E6%89%80%E5%BE%97%E7%A8%85%E9%96%8B%E6%94%AF) H1 2025 income tax expense was RMB 869 million, with an effective tax rate of 33.3%, a significant increase due to withholding tax provisions from capital structure planning - Income tax expense was **RMB 869,094,000** (2024: RMB 661,098,000)[31](index=31&type=chunk) - The effective tax rate was **33.3%** (2024: 25.3%), primarily due to comprehensive factors such as exchange rate fluctuations and capital yield rates, leading the company to make more reasonable plans for its domestic and overseas capital structure, thus providing for corresponding withholding income tax, which resulted in a higher tax rate for the current period[31](index=31&type=chunk) [Comprehensive Profitability Indicators](index=14&type=section&id=3.1.9%20%E7%B6%9C%E5%90%88%E7%9B%88%E5%88%A9%E6%8C%87%E6%A8%99) H1 2025 profit attributable to equity holders was RMB 1.737 billion, with profit margin at 11.7% and return on equity at 6.5%, both declining due to lower gross margin and higher tax rates - Profit attributable to equity holders was **RMB 1,737,422,000** (2024: RMB 1,952,032,000)[32](index=32&type=chunk) - Profit margin attributable to equity holders was **11.7%** (2024: 13.6%)[32](index=32&type=chunk) - Return on equity attributable to equity holders was **6.5%** (2024: 7.8%)[32](index=32&type=chunk) - The decline in comprehensive profitability indicators was mainly affected by a year-on-year decrease in gross profit margin and a significant increase in the income tax rate[32](index=32&type=chunk) [Inventory Provision](index=14&type=section&id=3.1.10%20%E5%AD%98%E8%B2%A8%E6%92%A5%E5%82%99) As of June 30, 2025, cumulative inventory provision reached RMB 188 million, an increase from 2024 year-end, with ongoing focus on inventory age and turnover management - As of June 30, 2025, the cumulative inventory provision was **RMB 187,934,000** (December 31, 2024: RMB 166,817,000)[33](index=33&type=chunk) - The Group will continue to control inventory age structure and turnover rate to maintain them at reasonable levels[33](index=33&type=chunk) [Expected Credit Loss Provision](index=15&type=section&id=3.1.11%20%E9%A0%90%E6%9C%9F%E4%BF%A1%E8%B2%B8%E虧%E6%90%8D%E6%92%A5%E5%82%99) As of June 30, 2025, cumulative expected credit loss provision was RMB 46.484 million, with RMB 41.631 million for trade receivables, emphasizing ongoing monitoring of aging and collections - As of June 30, 2025, the cumulative expected credit loss provision was **RMB 46,484,000** (December 31, 2024: RMB 45,678,000)[35](index=35&type=chunk) - Of this, the cumulative expected credit loss provision for trade receivables was **RMB 41,631,000** (December 31, 2024: RMB 41,658,000)[35](index=35&type=chunk) - The Group will continue to monitor the aging structure and collection status to maintain good performance in trade receivables turnover[35](index=35&type=chunk) [Liquidity and Financial Resources](index=15&type=section&id=3.1.12%20%E8%B3%87%E9%87%91%E6%B5%81%E5%8B%95%E6%80%A7%E5%8F%8A%E8%B2%A1%E6%94%BF%E8%B3%87%E6%BA%90) H1 2025 net cash from operations decreased to RMB 2.411 billion, with cash and equivalents increasing by RMB 4.299 billion, as the Group prioritizes cash flow management and details top-up placement proceeds - Net cash generated from operating activities was **RMB 2,411,101,000** (2024: RMB 2,730,305,000), a year-on-year decrease[36](index=36&type=chunk) - As of June 30, 2025, cash and cash equivalents amounted to **RMB 11,798,043,000**, a net increase of **RMB 4,299,447,000** from December 31, 2024[36](index=36&type=chunk) - **RMB 529,434,000** of net proceeds from the top-up placement remained unused, primarily allocated for investing in infrastructure restructuring and further enhancing the supply chain system, expected to be fully utilized by December 31, 2026[37](index=37&type=chunk) - As of June 30, 2025, the Group's credit facilities amounted to **RMB 14,741,000,000**, with no outstanding borrowings[38](index=38&type=chunk) [Foreign Exchange Risk](index=17&type=section&id=3.1.13%20%E5%A4%96%E5%8C%AF%E9%A2%A8%E9%9A%AA) Operating mainly in China with RMB settlements, the Group holds foreign currency cash and pays some expenses in HKD/USD, but without hedging, exchange rate fluctuations could impact financials - The Group primarily operates in Mainland China, with most transactions settled in RMB, and its reporting currency is RMB[40](index=40&type=chunk) - Some cash and bank deposits are denominated in HKD, USD, EUR, KRW, GBP, MOP, and SGD[40](index=40&type=chunk) - During the period, the Group did not undertake any hedging arrangements for exchange rate fluctuation risks, and any significant exchange rate fluctuations between foreign currencies and RMB may have a financial impact on the Group[41](index=41&type=chunk) [Significant Investments](index=17&type=section&id=3.1.14%20%E9%87%8D%E5%A4%A7%E6%8A%95%E8%B3%87) In January 2024, the Group acquired a Hong Kong property for RMB 2.013 billion to expand international business and serve as its headquarters, with a book value of RMB 1.847 billion as of June 30, 2025 - The Group signed an agreement in December 2023 and completed the acquisition of the entire share capital of Vansittart Investment Limited in January 2024, which primarily invests in a property in Hong Kong comprising 22 floors of commercial/office space and two retail levels[42](index=42&type=chunk)[44](index=44&type=chunk) - The adjusted total consideration for the acquisition was **HKD 2.221 billion** (approximately **RMB 2.013 billion**), funded by net proceeds from the top-up placement and internal resources[42](index=42&type=chunk)[44](index=44&type=chunk) - A portion of the property will serve as the Group's Hong Kong headquarters, with a book value of **RMB 1,847,079,000** after depreciation and impairment as of June 30, 2025, representing approximately **5.0%** of the Group's total assets[44](index=44&type=chunk) [Significant Acquisitions and Disposals of Subsidiaries, Associates, and Joint Ventures](index=18&type=section&id=3.1.15%20%E9%87%8D%E5%A4%A7%E6%94%B6%E8%B3%BC%E5%92%8C%E8%99%95%E7%BD%AE%E9%99%84%E5%B1%AC%E5%85%AC%E5%8F%B8%E3%80%81%E8%81%AF%E7%87%9F%E5%85%AC%E5%8F%B8%E5%92%8C%E5%90%88%E8%B3%87%E4%BC%81%E6%A5%AD) The Group made no significant acquisitions or disposals of subsidiaries, associates, or joint ventures in H1 2025 - For the six months ended June 30, 2025, the Group did not undertake any significant acquisitions or disposals of subsidiaries, associates, or joint ventures[45](index=45&type=chunk) [Future Plans for Significant Investments and Capital Assets](index=18&type=section&id=3.1.16%20%E9%87%8D%E5%A4%A7%E6%8A%95%E8%B3%87%E5%92%8C%E8%B3%87%E6%9C%AC%E8%B3%87%E7%94%A2%E7%9A%84%E6%9C%AA%E4%BE%86%E8%A8%88%E5%8A%83) The Group plans a RMB 3.3 billion investment in Guangxi, China, for a smart manufacturing, flexible supply chain, and R&D center, with RMB 1.945 billion invested as of June 30, 2025 - The Group plans to build a supply chain base in Guangxi Zhuang Autonomous Region, China, for the production and packaging of high-end sports equipment, as well as R&D and experience centers, with an estimated maximum investment of approximately **RMB 3.3 billion**[46](index=46&type=chunk) - As of June 30, 2025, the book value of non-current assets in this investment was **RMB 1,945,279,000**, representing approximately **5.3%** of the Group's total assets[47](index=47&type=chunk) - The remaining investment amount will be funded by unused net proceeds from the top-up placement and internal resources[47](index=47&type=chunk) [Pledge of Assets](index=18&type=section&id=3.1.17%20%E8%B3%87%E7%94%A2%E6%8A%B5%E6%8A%BC) The Group had no pledged assets as of June 30, 2025, or December 31, 2024 - As of June 30, 2025, and December 31, 2024, the Group had no assets pledged[48](index=48&type=chunk) [Contingent Liabilities](index=19&type=section&id=3.1.18%20%E6%88%96%E7%84%B6%E8%B2%A0%E5%82%B5) The Group faces a contingent liability of HKD 1.955 billion related to a claimed HKD 500 million short-term loan from Suntime Information (Hong Kong) Limited, which the Group intends to actively defend - The target company received a statutory demand claiming Active Legend had provided a short-term loan with a principal of **HKD 500,000,000**, with an outstanding total of **HKD 1,955,338,833**[50](index=50&type=chunk) - The target company applied for an injunction to restrain the liquidator from commencing winding-up proceedings; the liquidator subsequently withdrew the statutory demand, but Active Legend and Vast Gold have served writs of summons on the target company[50](index=50&type=chunk)[51](index=51&type=chunk) - The Group believes the target company has no obligation to repay the loan and will actively defend against the allegations in the writs of summons[51](index=51&type=chunk) [Business Review](index=19&type=section&id=3.2%20%E6%A5%AD%E5%8B%99%E5%9B%9E%E9%A1%A7) H1 2025 saw Li Ning Group solidify its operations, meeting expectations through product upgrades, brand marketing, channel optimization, and Olympic strategy, driving innovation across key sports categories - The consumer market experienced a moderate recovery in the first half, but consumer confidence fluctuated, and purchasing behavior became more rational, with the Group's performance largely meeting expectations[52](index=52&type=chunk) - The Group firmly implemented its core "single brand, multi-category, multi-channel" strategy, continuously increasing R&D investment and technological innovation, and promoting aerospace technology to empower sports innovation[53](index=53&type=chunk) - In brand marketing, the Group successfully signed as the official sportswear partner for the Chinese Olympic Committee and Chinese Sports Delegation for 2025-2028, and integrated traditional cultural elements into products through collaboration with the Palace Museum[53](index=53&type=chunk)[55](index=55&type=chunk) - In channel optimization, the Group continued to build an omni-channel matrix, promoting online-offline synergistic development, strengthening online governance and control, optimizing single-store efficiency and service quality offline, and advancing AI digital empowerment[54](index=54&type=chunk) [Deepening Olympic Marketing Strategy, Solidifying Professional Sports Brand Positioning](index=20&type=section&id=3.2.1%20%E6%B7%B1%E5%8C%96%E5%A5%A7%E9%81%8B%E7%87%9F%E9%8A%B7%E6%88%B0%E7%95%A5%EF%BC%8C%E5%A0%85%E5%AF%A6%E5%B0%88%E6%A5%AD%E9%81%8B%E5%8B%95%E5%93%81%E7%89%8C%E5%AE%9A%E4%BD%8D) Li Ning Group partnered with the Chinese Olympic Committee for 2025-2028, enhancing its professional image through "Chinese Glory, Li Ning Together" marketing, store refreshes, digital interactions, and integrating aerospace technology into sports equipment - Li Ning Group successfully signed as the official sportswear partner for the Chinese Olympic Committee and Chinese Sports Delegation for 2025-2028[55](index=55&type=chunk) - With "Chinese Glory, Li Ning Together" as the core marketing theme, the brand reinforced its professional image as a steadfast supporter of Chinese sports[55](index=55&type=chunk) - Through nationwide store visual refreshes, joint LOGO displays, exclusive core visual presentations, and the "Glory is Mine, Sports China" mini-program interactive experience, the Group deeply engaged **5,209 stores** nationwide, attracting over **156,000 participants**[55](index=55&type=chunk) - In collaboration with the Aerospace Technology Innovation Application Platform, an aerospace technology innovation application laboratory was established to apply advanced aerospace technology to Li Ning's professional sports equipment, launching "Aerospace Quick-Dry" and "Aerospace Sun Protection" technological achievements[56](index=56&type=chunk) [Deepening "Single Brand, Multi-Category, Multi-Channel" Strategic Layout, Promoting Li Ning Experience Value Upgrade](index=21&type=section&id=3.2.2%20%E6%B7%B1%E5%8C%96%E3%80%8C%E5%96%AE%E5%93%81%E7%89%8C%E3%80%81%E5%A4%9A%E5%93%81%E9%A1%9E%E3%80%81%E5%A4%9A%E6%B8%A0%E9%81%93%E3%80%8D%E6%88%B0%E7%95%A5%E4%BD%88%E5%B1%80%EF%BC%8C%E6%8E%A8%E5%8B%95%E6%9D%8E%E5%AF%A7%E5%BC%8F%E7%B6%93%E9%A9%97%E5%83%B9%E5%80%BC%E5%8D%87%E7%B4%9A) The Group focused on six core categories and expanded into new sports segments, leveraging technological innovation, omni-channel marketing, and Chinese cultural heritage to enhance product strength, brand influence, and consumer experience - Focused on running, basketball, training, badminton, table tennis, and sports casual six core categories, while actively expanding into new niche sports categories such as outdoor sports, tennis, and pickleball[57](index=57&type=chunk) - Empowered product upgrades with technological innovation, increased investment in professional sports resources, and strengthened differentiated brand advantages by solidifying professional sports mindset, showcasing athletic fashion aesthetics, and inheriting Chinese cultural values[57](index=57&type=chunk) [Running Category](index=21&type=section&id=3.2.2.1%20%E8%B7%91%E6%AD%A5%E5%93%81%E9%A1%9E) Li Ning's running category, driven by technology, sold over 5.26 million pairs of its three core running shoe IPs, launched the "Jing Hong" women's shoe, and sponsored marathons, securing 44 championships - Total sales of the three core running shoe IPs "Chao Qing," "Chi Tu," and "Fei Dian" exceeded **5.26 million pairs** during the period[59](index=59&type=chunk) - Launched iterated and upgraded products, with the "Fei Dian" family fully upgrading to "BOOM" midsole technology, achieving an energy return rate of up to **89%**[59](index=59&type=chunk) - The "Jing Hong" running shoe, designed for female runners, became a popular choice[59](index=59&type=chunk) - Running apparel introduced the "Long Que" racing vest and the "Chuan Shan Jia" trail running jacket[59](index=59&type=chunk) - Successfully sponsored the "Wuxi Marathon" and "Beijing Half Marathon," helping athletes win a total of **44 championships** in international and domestic competitions during the first half[60](index=60&type=chunk) [Basketball Category](index=22&type=section&id=3.2.2.2%20%E7%B1%83%E7%90%83%E5%93%81%E9%A1%9E) Li Ning's basketball category focuses on professional, "Wade," and "Counterflow" series, boosting brand exposure through leagues and new product launches like "ULTRALIGHT 2025" and "Wade 808 ULTRA," with "Counterflow" targeting outdoor enthusiasts - Focused on three major product series: professional basketball, "Wade" basketball, and "Counterflow" basketball[61](index=61&type=chunk) - Professional basketball enhanced brand exposure through the CBA league and NBA draft, launching the new hit product "ULTRALIGHT 2025," with cumulative sales exceeding **100,000 pairs** across all channels[61](index=61&type=chunk) - "Wade" basketball released the new generation "Wade 808 ULTRA" and launched the signature shoe "DLO1," achieving **100% sell-out** at the Fanatics Fest international stage[62](index=62&type=chunk) - "Counterflow" basketball shoes target Chinese outdoor basketball enthusiasts, launching the "Guerrilla" series, "Pursuit" series, and the all-around outdoor battle shoe "Counterflow," featuring new "BOOM" technology and ultra-durable rubber[63](index=63&type=chunk) [Training Category](index=23&type=section&id=3.2.2.3%20%E7%B6%9C%E8%A8%93%E5%93%81%E9%A1%9E) Li Ning's training category, driven by technology, boosted men's and women's fitness markets with innovative products like "smart protection" windbreakers and "air-conditioning cool-feel T-shirts," achieving millions in functional pants shipments and high sell-through for instant-dry T-shirts - The training category, with technological innovation as its strategic core, successfully built a sports equipment product matrix that combines technological empowerment with market advantages[64](index=64&type=chunk) - Women's products include windbreakers with "smart protection technology" and hoodies/pants offering exclusive softness, as well as "air-conditioning cool-feel T-shirts" certified by aerospace technology[64](index=64&type=chunk) - Men's training products focused on functional technology, with core "functional pants" achieving million-level shipments, and "instant-dry T-shirts" driving performance growth with high sell-through rates[65](index=65&type=chunk) - Marketing fully leveraged the dual endorsement advantages of aerospace technology and professional athletes, achieving leading performance in both online communication volume and interaction[65](index=65&type=chunk) [Badminton Category](index=24&type=section&id=3.2.2.4%20%E7%BE%BD%E6%AF%9B%E7%90%83%E5%93%81%E9%A1%9E) Li Ning's badminton category expanded its influence through tech innovation and product upgrades, with "Zhan Ji 2.0" shoes and "Thunder" rackets driving sales, while marketing efforts solidified its professional image through event sponsorships and athlete endorsements - The badminton competition apparel series applied top-tier fabric technology processes such as integrated weaving and COOLMAX yarn, receiving positive feedback from Indonesian and Singaporean teams[66](index=66&type=chunk) - The "Zhan Ji 2.0" badminton shoe, a key product in the all-around balanced series, continued to sell well in the first half[66](index=66&type=chunk) - Equipment product sales maintained rapid growth, with professional products like "Thunder 80 Light" and "Thunder 90NEW" launched[67](index=67&type=chunk) - Marketing adopted "Good Products, Made by Li Ning, Made in China" as its category communication theme, completing sponsorships for events such as the China (Ruichang) International Badminton Master Tournament and the 2025 Singapore Open, and renewing its contract with the Indonesian national team[67](index=67&type=chunk) [Table Tennis Category](index=24&type=section&id=3.2.2.5%20%E4%B9%92%E4%B9%93%E7%90%83%E5%93%81%E9%A1%9E) Li Ning's table tennis category maintained market leadership through product innovation like "BOOM Silk Technology" footwear and aerospace material apparel, covering all user levels, and achieved significant marketing success as a WTT series partner, with Weibo topic readership exceeding 16.08 billion - Table tennis shoe uppers adopted breakthrough "BOOM Silk Technology," achieving a perfect balance of lightweight and strong support; innovatively developed partitioned midsole system integrated multiple core technologies[69](index=69&type=chunk) - Apparel products utilized aerospace material technology and original yarn antibacterial processes to enhance moisture-wicking and quick-drying performance[69](index=69&type=chunk) - In product portfolio strategy, a multi-level product matrix was built, covering professional athletes (Champion Series), advanced users (Elite Series), and entry-level enthusiasts (Rookie Series)[69](index=69&type=chunk) - As an official partner of the WTT series, it deeply engaged with **18 international top-tier events**, achieving breakthrough results in the Doha World Table Tennis Championships marketing campaign, with Weibo topic readership exceeding **16.08 billion**[70](index=70&type=chunk) [Sports Casual Category](index=25&type=section&id=3.2.2.6%20%E9%81%8B%E5%8B%95%E4%BC%91%E9%96%92%E5%93%81%E9%A1%9E) Li Ning's sports casual series, rooted in Chinese culture, launched successful co-branded collections, saw steady growth in footwear like "Bu Ou" and "Cat Claw," and "China Li Ning" expanded international influence through collaborations with trendy brands, while "LI-NING 1990" upgraded its golf offerings - With Chinese culture as its core anchor, deeply integrating traditional aesthetics with modern design, it launched the Forbidden City co-branded series and Disney co-branded series[71](index=71&type=chunk) - Sports casual footwear showed steady growth, with key products "Bu Ou" and "Cat Claw" achieving significant year-on-year sales increases, the "SOFT