Core Viewpoint - Li Ning's Q3 2025 operational data shows a marginal decline in overall revenue, with e-commerce and children's apparel performing relatively better [1] Group 1: Financial Performance - In Q3 2025, Li Ning's total revenue (excluding Li Ning YOUNG) decreased by a mid-single-digit percentage year-on-year, with online e-commerce growing at a high single-digit percentage while offline sales declined at a high single-digit percentage [1] - The discount rate has deepened, with a slight increase in inventory turnover ratio due to early stocking, expected to return to 4-5 months by year-end [1] - As of the end of Q3, the inventory turnover ratio was 5-6 months, showing an increase both year-on-year and quarter-on-quarter, attributed to early stocking for the upcoming festivals [1] Group 2: Product Category Performance - Running and fitness categories continue to grow, achieving low single-digit growth driven by professional products, while basketball and lifestyle segments are under pressure, with basketball sales declining over 20% [2] - The outdoor category has seen good growth due to industry trends and new product launches, although its scale remains small [2] Group 3: Channel and Store Expansion - As of September 30, Li Ning had 6,132 sales points (excluding YOUNG), a net increase of 33 from the previous quarter, with a net increase of 15 sales points year-to-date [2] - The company plans to maintain its store opening strategy for the year, with a net closure of 10-20 direct sales stores and a net increase of 50 wholesale stores [2] Group 4: Future Outlook - The company maintains its 2025 performance guidance, expecting revenue to remain flat and net profit margin to be in the high single digits, despite facing some pressure [3] - Upcoming product launches, including the 2026 Winter Olympics gear and new technology platforms, are anticipated to enhance brand competitiveness and sales [3] - The company continues to focus on the sports sector, emphasizing product refinement and brand accumulation for steady growth [3]

Company Overview - The company reported a decline in retail sales for the Li Ning brand (excluding Li Ning YOUNG) in Q3 2025, with a year-on-year decrease in retail revenue in the mid-single digits, while net retail points increased by 33 during the quarter [1] - The weak retail environment in Q3 2025 negatively impacted sales performance, with deeper discounts year-on-year and increased inventory due to preemptive stocking [1] Sales Performance - Retail pressure intensified from July to September 2025, with the direct sales channel benefiting from outlet support and proactive adjustments, resulting in a mid-single-digit decline in retail revenue, which was better than the high single-digit decline in the wholesale channel [1] - Online channel revenue showed a year-on-year increase in the mid-single digits [1] - Key growth drivers included running, fitness, and badminton, with running and fitness achieving low single-digit revenue growth year-on-year, while basketball and lifestyle categories faced relative pressure [1] Inventory and Discount Strategy - To address weak sales, the company proactively adjusted its terminal strategy, resulting in a low single-digit increase in overall channel retail discounts year-on-year, with direct and online channels experiencing a greater increase than wholesale [1] - By the end of September, the inventory-to-sales ratio reached 5-6 times, indicating a healthy inventory structure, with management expressing confidence in returning to a healthy level of 4-5 times by year-end [1] Future Outlook - In Q4 2025, the company plans to focus on the Olympic and sports technology themes to enhance brand momentum and support sustainable growth, while iterating and updating product lines in running, basketball, cross-training, and outdoor categories [2] - The retail side will further balance sales, discounts, and inventory management to maintain a healthy inventory level, despite ongoing sales pressure [2] Earnings Forecast and Valuation - The company maintains its EPS forecasts for 2025 and 2026 at 0.92 and 1.07 CNY, respectively, with the current stock price corresponding to 18 and 15 times the 2025 and 2026 P/E ratios [2] - The company retains an outperform rating and target price of 22.68 HKD, which corresponds to 23 and 19 times the 2025 and 2026 P/E ratios, indicating a 25% upside potential from the current stock price [2]

Fixed Income - Credit yields have entered a smooth downward channel in October, with credit spreads showing a noticeable compression. For example, the yield of the 5Y AAA credit bond "25 ICBC Secondary Capital Bond 02BC" has decreased from 2.19% at the beginning of the month to 2.11% by the end of the week, a decline of nearly 8 basis points [10] - The report suggests a bullish outlook for the bond market, recommending a focus on 10Y government bonds, 30Y government bonds, and 5Y capital bonds, with expectations for the 10Y government bond yield to return to around 1.65% by year-end [16][12] Media and Internet - The AI comic industry is experiencing high growth driven by both supply and demand, with a significant increase in the number of AI comic productions and viewership. The market scale is expected to exceed 20 billion, with related companies projected to grow significantly [19] - The gaming sector is expected to continue benefiting from high-quality product performance, with recommendations to focus on major titles and new game pipelines that show structural growth opportunities [20] Pharmaceuticals - The pharmaceutical index has seen a slight increase of 0.58%, but innovative drugs are currently underperforming. However, the report anticipates a positive investment trend in innovative drugs as clinical research progresses and BD (business development) opportunities expand [30][33] - Breakthroughs in gene testing technology are opening up significant market opportunities, particularly in multi-cancer early screening and MRD (minimal residual disease) monitoring, with several companies achieving notable clinical trial results [31][32] Utilities and Environmental Protection - In September, electricity consumption growth was recorded at 4.5%, indicating a recovery in secondary industry electricity usage. The report highlights the importance of monitoring companies with potential third-quarter performance catalysts [36][37] - The coal supply is expected to remain strong, with a recovery in raw coal production and a stable demand outlook for winter heating [36] New Consumption - Li Ning's retail revenue has seen a decline due to external environmental disturbances, but online sales continue to grow. The company is actively expanding its offline store presence, which may support long-term growth [29] - The report emphasizes the importance of sports resources in aiding the company's business development in the medium to long term [29]

Core Perspective - The collaboration between Li Ning and the Chinese Olympic Committee signifies a new chapter for the brand, aiming to connect Olympic glory with the broader public market through innovative sportswear that embodies both technology and cultural significance [2][5][11]. Group 1: Product Innovation - The newly launched Olympic attire for the 2026 Milan Winter Olympics features a blend of "Chinese Red" and "Snow Mountain White," integrating cultural elements with winter sports aesthetics [2][5]. - The attire showcases advanced sports technology, achieving breakthroughs in "temperature retention, moisture permeability, and protection," highlighting Li Ning's commitment to innovation [5][6]. - The collaboration with the China National Space Administration has led to the introduction of cutting-edge technologies like "space temperature-locking cotton" and "basalt far-infrared," elevating the performance of the Olympic gear [6][10]. Group 2: Cultural Significance - The Olympic attire serves as a "mobile exhibit" that combines professional technology with Eastern aesthetics, representing a new image of Chinese brands on the global stage [5][8]. - The design incorporates the "Double Victory Pattern," symbolizing victory and harmony, reflecting the athletes' unity with their country and the Olympic spirit [6][10]. - The attire not only represents individual athlete achievements but also embodies the collective spirit of the nation, making the Olympic glory tangible for the public [8][11]. Group 3: Brand Positioning - Li Ning's long-standing relationship with the Chinese Olympic Committee underscores its role as a trusted partner in promoting national sports, transcending traditional commercial interests [10][11]. - The brand's history, rooted in the legacy of Olympic champion Li Ning, reinforces its unique position in the sports industry, emphasizing a commitment to both professional excellence and social contribution [10][11]. - The partnership with the Olympic Committee is viewed as a strategic move to enhance Li Ning's professional image and long-term value, integrating technology, brand ethos, and sports culture [11][13]. Group 4: Market Strategy - The collaboration aims to translate elite sports technology into consumer products, allowing the public to experience the innovations of the Chinese sports delegation [13][14]. - Li Ning's focus on connecting national pride with everyday sports activities reflects a broader trend in the industry, where brands seek to resonate with new generations of consumers [14]. - The brand's commitment to professional integrity and cultural depth positions it for sustainable growth in the competitive sports market [14].

Investment Rating - The report maintains a "Buy" rating for Li Ning (2331.HK) with a target price of HKD 21.6, representing a potential upside of 18.7% from the current price of HKD 18.2 [4][21]. Core Insights - Li Ning's management has decided to keep the full-year performance guidance unchanged despite challenges in terminal demand, aiming for revenue to remain flat year-on-year and a high single-digit net profit margin [10][11]. - The company is focusing on enhancing brand strength, with recent sponsorship of the Chinese Olympic Committee and participation in high-profile events to boost brand visibility [10][11]. - The report indicates a downward trend in overall sales, particularly in direct stores and distributor channels, while e-commerce sales have shown growth [10][11]. Financial Performance Summary - For 2025, the estimated revenue is projected at RMB 28,685 million, reflecting no growth compared to 2024, with a core net profit forecast of RMB 2,524 million, a decrease of 24.6% year-on-year [12][17]. - The gross margin is expected to be around 48.5% for 2025, slightly down from 49.4% in 2024 [12][14]. - The report highlights a significant increase in inventory turnover days, indicating potential inventory management challenges [10][12]. Market Expectations - The report notes that the market's expectations for Li Ning's performance are mixed, with a range of estimates for revenue and profit growth varying significantly among analysts [7][22]. - The company is navigating a competitive landscape with increased promotional activities, particularly during the "Double Eleven" shopping festival [10][11]. Strategic Focus - Li Ning is committed to a three-year strategy centered on brand revitalization and product innovation, which is expected to lay a foundation for future performance improvements [10][11]. - The company plans to balance sales revenue, channel inventory, and discount levels to maintain healthy inventory and manageable discount rates [10][11].

Investment Rating - The investment rating for the company is "Buy" (maintained) [5] Core Views - The external environment remains challenging, but the company is expected to benefit from sports resources that will support its long-term development [5] - The company has shown resilience in its e-commerce channel, maintaining high single-digit growth despite external pressures [7] - The company is actively expanding its offline store presence, with a net increase of 33 stores in Q3 2025, totaling 6,132 stores [7] - The signing of player Yang Hanshen, who was selected in the first round of the NBA draft, is anticipated to enhance the company's brand and product sales in the basketball category [7] - The company is projected to achieve net profits of RMB 2.645 billion, RMB 2.843 billion, and RMB 3.101 billion for the years 2025 to 2027, respectively [7] Financial Summary - Revenue projections for the company are as follows: RMB 28,676 million in 2024, RMB 29,027 million in 2025, RMB 30,766 million in 2026, and RMB 32,845 million in 2027, with growth rates of 3.9%, 1.2%, 6.0%, and 6.8% respectively [8] - The company's net profit for 2025 is estimated at RMB 2,645 million, reflecting a year-on-year decline of 12.21% [6][8] - The company's return on equity (ROE) is projected to decline from 11.54% in 2024 to 9.00% in 2027 [8]

Group 1: Company Analysis - The report highlights the strong performance of Dongfang Caifu (300059.SZ), with a revenue of 11.589 billion yuan for the first three quarters of 2025, representing a year-on-year increase of 58.7%, and a net profit attributable to shareholders of 9.097 billion yuan, up 50.6% year-on-year [9][10] - The company's return on equity (ROE) stands at 10.74%, an increase of 2.60 percentage points compared to the previous year [9] - The significant growth in the company's securities business, particularly in brokerage and margin financing, is attributed to the active trading environment in the capital market since Q4 2024 [9][10] Group 2: Industry Insights - The report discusses the recovery of the fund distribution business, noting that Dongfang Caifu's fund distribution scale is leading in the industry, with a total of 1.0572 trillion yuan in fund sales for the first half of 2025 [11] - The report emphasizes the resilience of the export market, with a surprising export growth rate of 6.6% in Q3 2025, indicating a robust recovery despite expectations of a decline [15] - The media industry is identified as having a favorable seasonal effect, particularly in November, suggesting a good opportunity for investment in this sector [33]

Summary of Li Ning's Q3 2025 Earnings Call Company Overview - **Company**: Li Ning - **Date**: Q3 2025 Earnings Call Key Points Industry Performance - Li Ning's overall channel revenue in Q3 decreased by mid-single digits year-on-year, with a weakening trend observed month by month [2][4][6] - The retail environment remains challenging, with expectations for Q4 to be below prior forecasts [2][8] Financial Metrics - As of the end of Q3, the number of main brand stores increased by 15 to 6,132, while direct-operated stores decreased by 46 [2][4] - The company maintained its annual store opening target but adjusted the net opening/closing numbers for various store types [2][5] Sales and Discounts - Discounts across all channels deepened year-on-year, particularly in direct and e-commerce channels, with offline discounts reaching mid-60% levels [2][6] - The company anticipates that the overall terminal performance will remain below expectations, posing challenges to achieving annual financial guidance [2][8] Product Categories - Pressure in Q3 primarily stemmed from basketball and sports lifestyle categories, with running and fitness growth slowing down [2][15] - Children's products and women's products showed better growth compared to men's products, but overall consumer spending remains weak [2][15] Marketing and Promotions - Li Ning plans to leverage upcoming events, including the 2026 Milan Winter Olympics, to enhance brand visibility and support sales growth [4][10][11] - The company is focusing on a comprehensive marketing matrix to support business development and manage costs effectively [3][16] Inventory Management - The company has increased inventory levels in anticipation of the double holiday and "Double Eleven" shopping festival, maintaining a healthy inventory turnover ratio of 4-5 months [6][9] - Despite the increase in inventory, Li Ning aims to control discounts to maintain profitability [9][23] Competitive Landscape - The competitive environment remains intense, with brands focusing on balancing revenue and inventory, leading to increased discounting pressure [8][20] - Li Ning is committed to enhancing its core competitiveness in running and basketball while addressing the challenges posed by competitors like Nike [8][20][21] Future Outlook - The company is currently formulating its 2026 budget, expecting moderate growth in domestic consumption but acknowledging ongoing business pressures [14] - Li Ning's long-term strategy includes focusing on high-value and functional products, as well as tapping into emerging sports trends [14][27] New Product Launches - Upcoming product launches include new running shoes featuring advanced water-repellent technology and collaborations with popular franchises [18][19] - The company is also enhancing its outdoor product line and integrating elements of traditional Chinese aesthetics into its offerings [21][22] Conclusion - Li Ning is navigating a challenging retail environment with strategic marketing initiatives and product innovations aimed at sustaining growth and enhancing brand equity [27]

Investment Rating - The investment rating for the company is "Outperform the Market" (maintained) [1] Core Views - In Q3 2025, the company's sales revenue experienced a mid-single-digit decline year-on-year, with a slowdown compared to the first half of the year. However, e-commerce sales recorded a high single-digit growth. The discount rate has deepened compared to the previous period, and the inventory-to-sales ratio has increased to 5-6 months due to holiday and promotional stocking. The fourth quarter is expected to see a concentrated release of new products [3][4][12] - The company has a healthy operational foundation and potential for brand growth acceleration through future marketing efforts. The profit forecast for 2025-2027 is estimated at 2.512 billion, 2.825 billion, and 3.043 billion yuan, respectively, with year-on-year changes of -16.6%, +12.5%, and +7.7% [3][13] Summary by Sections Retail Performance - As of September 30, 2025, the company's retail revenue (excluding Li Ning YOUNG) recorded a mid-single-digit decline year-on-year. Offline channels (including retail and wholesale) saw a high single-digit decline, while e-commerce virtual store business achieved high single-digit growth [2][3] Store Count - As of September 30, 2025, the total number of sales points in China (excluding Li Ning YOUNG) was 6,132, a net increase of 33 from the previous quarter. The retail business saw a net decrease of 46 stores, while the wholesale business had a net increase of 61 stores. Li Ning YOUNG had 1,480 sales points, with a net increase of 45 from the previous quarter [2] Product Launches - The fourth quarter is expected to see a concentrated release of new products, including new technology fabric "super water-repellent" running shoes and various iterations of basketball and outdoor products [5][6][12] Financial Forecast - The company’s revenue for 2025 is projected to be 29.34 billion yuan, with a year-on-year growth of 2.3%. The net profit for 2025 is expected to be 2.512 billion yuan, reflecting a decline of 16.6% compared to the previous year [14][18]

Investment Rating - The report maintains an "Outperform" rating for Li Ning [3][9] Core Insights - Li Ning's Q3 2025 revenue showed a marginal decline, with e-commerce and children's apparel performing relatively better. The overall revenue decreased in the mid-single digits year-on-year, while online sales grew in the high single digits, and offline sales declined in the high single digits [9] - The company anticipates maintaining its performance guidance for 2025, aiming for flat revenue and a high single-digit net profit margin despite facing some pressures. Upcoming marketing initiatives related to the 2026 Milan Winter Olympics and technology releases are expected to enhance brand competitiveness [9] Financial Summary - Revenue projections (in billion RMB): - 2023: 27.6 - 2024: 28.7 - 2025E: 28.8 - 2026E: 30.1 - 2027E: 31.2 - Year-on-year growth rates: - 2023: 7% - 2024: 4% - 2025: 0% - 2026: 4% - 2027: 4% [8] - Net profit projections (in billion RMB): - 2023: 3.19 - 2024: 3.01 - 2025E: 2.48 - 2026E: 2.64 - 2027E: 2.78 - Year-on-year growth rates for net profit: - 2023: -22% - 2024: -5% - 2025: -18% - 2026: 6% - 2027: 5% [8] Operational Insights - The discount rate has deepened slightly due to increased inventory turnover, with expectations to return to a 4-5 month inventory turnover by year-end. The overall inventory turnover ratio is currently at 5-6 months [9] - The number of sales points (excluding Li Ning YOUNG) increased to 6,132, with a net addition of 33 points in the current year. The company plans to close 10-20 direct stores while increasing wholesale points by 50 [9]