Macro and Strategy - June financial data shows a significant rebound in credit, with new social financing reaching 4.20 trillion yuan, exceeding expectations of 3.71 trillion yuan, and new RMB loans at 2.24 trillion yuan, surpassing the forecast of 1.84 trillion yuan [8][9][10] - The M2 money supply grew by 8.3% year-on-year, indicating a recovery in domestic economic momentum as private sector balance sheet expansion improves [8][9] - The "seesaw effect" between government financing and corporate loans has weakened, suggesting a shift in credit dynamics as local governments approach their annual debt targets [9][10] Retail Industry - The jewelry market is projected to grow steadily, with the market size reaching 728 billion yuan in 2024, reflecting a compound annual growth rate of 3.6% since 2019 [11][12] - The top five companies in the jewelry sector hold a market share of 41.4%, indicating increasing industry concentration as consumer preferences shift towards quality and design [11][12] - The retail sector is benefiting from the recent Amazon Prime Day, which generated an estimated $24.1 billion in sales, a 30% increase year-on-year, highlighting the growth potential in cross-border e-commerce [13][14] Food and Beverage Industry - The food and beverage sector saw a 0.92% increase, underperforming the Shanghai Composite Index by 0.17 percentage points [14] - The liquor market is stabilizing, with major brands focusing on brand positioning and market health, while the overall demand remains under pressure [15][16] - Recommendations include leading brands like Kweichow Moutai and Wuliangye, which have shown resilience and potential for recovery [15][16] Construction and Building Materials - The construction materials sector is expected to improve due to a shift towards healthy competition and urban renewal initiatives, with a focus on technological innovation [17][18] - Cement prices have stabilized, with a slight decrease of 0.4% week-on-week, while demand remains steady despite seasonal fluctuations [17][18] - Recommendations include companies like Three Trees and China National Building Material, which are well-positioned to benefit from domestic demand [18] Computer Industry - The AI ASIC market is rapidly expanding, with a projected market size growth from $14.8 billion in 2024 to $83.8 billion by 2030, reflecting a compound annual growth rate of 33.5% [19][20] - The price advantage of AI ASIC chips over GPUs is significant, with average prices of $5,236 compared to $8,001 for GPUs, making them more attractive for specific applications [19][20] - Companies like Google and Amazon are accelerating their development of ASIC chips, indicating strong future demand in this sector [21] Home Appliances - The home appliance sector is experiencing stable growth in domestic sales, driven by government subsidies, while exports face challenges due to high bases and tariff impacts [22][23] - White goods are seeing a slight increase in domestic sales, with air conditioning units showing a 9.5% growth in domestic shipments [22][23] - Recommendations include leading brands such as Midea and Gree, which are expected to maintain strong performance [22][23] Pharmaceutical Industry - Merck's acquisition of Verona for $10 billion aims to enhance its portfolio with a new COPD treatment, indicating strong growth potential in respiratory therapies [27][28] - WuXi AppTec is projected to achieve a 102% increase in net profit for the first half of 2025, reflecting robust operational performance [29] - The pharmaceutical sector is showing resilience, with a focus on innovative treatments and strategic acquisitions [27][28] Coal Industry - The coal market is expected to stabilize as domestic production increases and imports decrease, with a projected production of 4.85 billion tons in 2025, a 2% increase year-on-year [31][32] - Demand for coal is anticipated to improve in the second half of the year, particularly for non-electric uses such as chemical production [33] - Recommendations include leading coal companies like China Shenhua and China Coal Energy, which are well-positioned to benefit from market dynamics [34] Electronics Industry - The electronics sector is experiencing positive momentum, with a 0.93% increase in stock performance, driven by strong demand in the optical and semiconductor segments [34] - The industry is expected to see significant catalysts in the coming months, particularly in the context of AI and cloud computing advancements [34] - Companies involved in ASIC development are likely to benefit from the ongoing trends in computing and data processing [34]

Investment Rating - The report maintains an "Outperform" rating for Li Ning [1][6][25] Core Views - Li Ning's second quarter performance aligns with expectations, with overall channel revenue showing low single-digit growth, while offline channels experienced a decline [6] - The company is actively managing risks in a challenging retail environment, with a focus on long-term stability [6] - Marketing efforts are expected to increase due to the endorsement of NBA player Yang Hanshen and the partnership with the Chinese Olympic Committee [6] Financial Data and Profit Forecast - Revenue projections for Li Ning are as follows: - 2023: 276 billion RMB - 2024: 287 billion RMB - 2025E: 288 billion RMB - 2026E: 301 billion RMB - 2027E: 312 billion RMB - Net profit forecasts are: - 2023: 31.9 billion RMB - 2024: 30.1 billion RMB - 2025E: 24.8 billion RMB - 2026E: 26.4 billion RMB - 2027E: 27.8 billion RMB - The expected PE ratios are 12 for 2023, 12 for 2024, 15 for 2025, 14 for 2026, and 13 for 2027 [5][6][16] Company Performance Insights - The inventory level is healthy, with a stock-to-sales ratio of approximately 4 months, although discount rates are under pressure due to weak industry demand [6] - Running and fitness categories are leading growth, while basketball products are experiencing a decline of over 20% [6] - The number of sales points for Li Ning (excluding Li Ning Young) is 6099, with a net increase of 11 stores in the second quarter [6] - The company plans to continue opening new stores in the second half of the year, maintaining its annual store opening plan [6]

Investment Rating - The investment rating for the company is "Buy" (maintained) [1] Core Views - The company is expected to face challenges in sales in the second half of the year, with discounts and gross margins likely under pressure. However, the partnership with the Chinese Olympic Committee is anticipated to enhance long-term brand development [7] - The company plans to increase marketing and R&D investments related to the Olympics and technology in the second half of the year [7] - The company has deepened discounts to boost sales, and inventory levels have improved, with a good inventory control [7] Financial Forecasts - Total revenue (in million RMB) is projected to be 27,598 in 2023, 28,676 in 2024, 28,834 in 2025, 30,529 in 2026, and 32,074 in 2027, with year-on-year growth rates of 6.96%, 3.90%, 0.55%, 5.88%, and 5.06% respectively [1] - Net profit attributable to the parent company (in million RMB) is forecasted to be 3,187 in 2023, 3,013 in 2024, 2,313 in 2025, 2,598 in 2026, and 2,926 in 2027, with year-on-year changes of -21.58%, -5.46%, -23.24%, 12.31%, and 12.64% respectively [1] - The latest diluted EPS is expected to be 1.23 in 2023, 1.17 in 2024, 0.89 in 2025, 1.00 in 2026, and 1.13 in 2027 [1] - The P/E ratios are projected to be 11.85 for 2023, 12.54 for 2024, 16.33 for 2025, 14.54 for 2026, and 12.91 for 2027 [1]

Investment Rating - The report maintains a strong buy rating for Li Ning, with a current stock price of 16.24 HKD and a corresponding PE of 15.5X for 2025 [2][3]. Core Insights - Li Ning's overall revenue growth in Q2 2025 is low single-digit, with pressure on discounts due to weak consumer demand and intensified market competition. The management has kept the revenue guidance for 2025 flat, but profitability is expected to decline. The projected net profit for 2025-2027 is 2.38 billion, 2.53 billion, and 2.72 billion RMB, with year-on-year growth rates of -21%, 7%, and 7% respectively [1][2]. Revenue and Profit Forecast - The expected revenue for Li Ning for 2025-2027 is 28.74 billion, 29.96 billion, and 31.11 billion RMB, with year-on-year growth rates of 0%, 4%, and 4% [2][8]. - The projected net profit for the same period is 2.38 billion, 2.53 billion, and 2.72 billion RMB, with year-on-year growth rates of -21%, 7%, and 7% [2][8]. Sales Performance - In Q2 2025, the revenue growth by category shows high single-digit growth in running and fitness, flat performance in sports lifestyle, and a 20% decline in basketball. Outdoor and smaller categories are performing well [1][7]. - The sales performance by channel indicates that lower-tier markets are outperforming higher-tier markets, with outlet stores performing better than full-price stores [1][7]. Financial Metrics - The total market capitalization of Li Ning is 42 billion HKD, with a total share capital of 2,585 million shares and a net asset value per share of 10.1 HKD [3]. - The return on equity (ROE) is reported at 11.5%, with a debt-to-asset ratio of 26.9% [3][11]. Inventory and Discount Pressure - Due to the slowdown in terminal revenue growth and the need for inventory clearance, there is significant discount pressure in Q2 2025, although inventory levels are currently considered healthy [7][10].

Investment Rating - The report assigns a "Neutral" rating to the company, Li Ning (2331 HK), with a target price of HKD 16.28, indicating a potential upside of 1.4% from the current price of HKD 16.06 [1][2][5]. Core Insights - The second quarter saw a slow recovery in sales, slightly below the company's expectations, with retail sales growth in the Li Ning brand (excluding Li Ning YOUNG) showing low single-digit year-on-year growth [5][6]. - The management indicated that the recovery trend in Q2 weakened compared to Q1, and sales and discounts remain under pressure since July [5]. - The report suggests that the company's sales recovery in the second half of the year will be gradual, leading to a downward revision of net profit forecasts for 2025-2027 [5][6]. Financial Overview - Revenue projections for 2025 are set at RMB 29,007 million, reflecting a year-on-year growth of 1.2%. The revenue for 2026 and 2027 is projected to be RMB 30,103 million and RMB 30,945 million, respectively [4][8]. - Net profit estimates for 2025 have been revised down to RMB 2,678 million, with a projected decline in net profit margins due to increased promotional activities and competition [5][7]. - The report anticipates a slight decrease in gross margin for 2025, with a forecasted gross margin of 49.1% [7][8]. Sales Channel Performance - In Q2, online sales outperformed offline channels, with e-commerce showing mid-single-digit growth year-on-year, while offline retail experienced low single-digit declines [5][6]. - The wholesale channel performed better than retail, with low single-digit growth in wholesale and a decline in retail sales [5][6]. Store Optimization and Product Trends - The number of offline stores is undergoing slight adjustments, with a net increase of 11 stores compared to Q1, while Li Ning YOUNG saw a net decrease of 18 stores [6][8]. - Product category growth continued from Q1, with running and fitness categories leading, while basketball products faced significant declines [6][8].

Investment Rating - The report maintains a "Buy" rating for Li Ning [6] Core Views - Li Ning's adult revenue showed low single-digit year-on-year growth in Q2 2025, with offline channel revenue declining and e-commerce revenue growing in mid-single digits [1][2] - The company is focusing on optimizing its product and marketing strategies to establish a foundation for long-term growth, particularly through its partnership with the Olympic Committee [3] - Revenue for 2025 is expected to remain flat year-on-year, while net profit attributable to shareholders is projected to decline by 21% [3] Summary by Sections Revenue and Sales Performance - In Q2 2025, Li Ning's direct sales revenue decreased in mid-single digits, attributed to a significant number of store closures in the second half of 2024 [1] - The wholesale channel revenue grew in low single digits, with the number of wholesale stores increasing to 4,821 by the end of H1 2025 [1] - E-commerce sales growth slowed compared to Q1 2025, with Q2 growth in mid-single digits, influenced by a weaker overall sales environment during the 618 shopping festival [2] Product Segments - Li Ning's children's clothing segment, Li Ning YOUNG, is expected to outperform adult sales, with a steady growth rate and an increase in store count to 1,435 by the end of Q2 2025 [2] - The company is enhancing its product structure and brand promotion for children's clothing to drive long-term growth [2] Inventory Management - Li Ning emphasizes inventory management, with an estimated inventory turnover ratio of around 4 by the end of Q2 2025, indicating a healthy inventory level [2] Financial Projections - The company forecasts revenues of 28.92 billion in 2025, with a net profit of 2.39 billion, reflecting a 21% decline [3] - The projected earnings per share (EPS) for 2025 is 0.92, with a price-to-earnings (P/E) ratio of 16 times [3][5] Market Position and Strategy - Li Ning is focusing on enhancing its brand influence through Olympic-related marketing activities and expanding its product matrix in various sports categories, including running, basketball, badminton, and outdoor sports [3]

Core Viewpoint - Company maintains EPS forecasts for 2025/26 at 0.92/1.07 HKD, with current stock price corresponding to 16/14 times 2025/26 P/E ratio, maintaining an outperform rating and target price of 20.82 HKD, indicating a 30% upside potential from current price [1] Group 1: Financial Performance - In Q2 2025, the retail revenue of the Li Ning brand (excluding Li Ning YOUNG) grew low single digits year-on-year, with a net increase of 11 retail points in the quarter [1] - Wholesale channel continues to outperform direct sales, with offline wholesale retail revenue growing low single digits year-on-year and a net opening of 24 retail points during the period; online channel retail revenue grew mid single digits year-on-year [2] - The running category saw sales growth in high single digits year-on-year, while the fitness category continued to perform well with high single-digit growth; the sports lifestyle category stabilized with year-on-year growth flat in Q2 2025 [2] Group 2: Inventory and Discounts - Despite a volatile retail environment, the company maintained a healthy inventory level, with a channel inventory turnover ratio of approximately 4x as of the end of June, indicating controllable inventory status [2] - Discounts in both online and offline channels deepened low single digits year-on-year [2] Group 3: Marketing and Future Outlook - As retail remains volatile since July, the company plans to increase marketing and product investment focused on "Olympics plus technology" for the second half of the year, including activities related to Olympic sponsorship and new product launches in various categories [3] - The management maintains guidance for 2025 revenue to be flat year-on-year, with net profit margin in high single digits [3]

Investment Rating - The investment rating for the company is "Outperform the Market" (maintained) [1][3][11] Core Views - In Q2 2025, the company's retail sales recorded low single-digit growth year-on-year, with a slowdown compared to Q1. E-commerce sales showed mid-single-digit growth, while discounts remained under pressure. The inventory-to-sales ratio improved to four months [3][4][5] - The company has a healthy channel inventory and cash operating situation, with marketing efforts expected to drive brand growth in the long term despite short-term profit pressures due to increased brand investment [3][11] - The company maintains its profit forecast, expecting net profits of 2.51 billion, 2.83 billion, and 3.04 billion yuan for 2025-2027, with year-on-year changes of -16.8%, +12.8%, and +7.6% respectively [11][12] Retail Performance - As of June 30, 2025, the total number of sales points in China (excluding Li Ning YOUNG) was 6,099, a net increase of 11 from the previous quarter, but a net decrease of 18 year-to-date. The number of Li Ning YOUNG sales points was 1,435, with a net decrease of 18 from the previous quarter and 33 year-to-date [2][3] - The retail channel (direct operation) recorded a mid-single-digit decline, while the wholesale channel saw low single-digit growth. E-commerce virtual store business achieved mid-single-digit growth [2][3] Marketing Strategy - The marketing strategy focuses on two main lines: NBA (Yang Hansheng) and the Olympics (COC). The marketing expense ratio is expected to maintain a low double-digit level for the year, with significantly higher rates in the second half compared to the first half [3][5] - The company is launching limited products and personal logos in collaboration with NBA players, while also promoting a new product line centered around the Olympics and technology [5][11] Financial Forecast - The company forecasts revenue growth of 0.5% in 2025, with expected revenues of 28.81 billion yuan, 30.24 billion yuan, and 31.90 billion yuan for 2025-2027 [12][16] - The expected earnings per share for 2025 is 0.97 yuan, with a price-to-earnings ratio (PE) of 15.4 [12][13]

Summary of Li Ning Company Conference Call Company Overview - **Company**: Li Ning Company - **Period**: Q2 2025 Key Points Store Performance - In Q2 2025, Li Ning's main brand stores decreased by 18, while Li Ning YOUNG brand stores decreased by 33, aligning with the company's plan for the year [2][4] - As of the end of Q2 2025, the total number of Li Ning main brand stores was 6,099, a net increase of 11 from the previous quarter but a decrease of 18 from the end of the previous year [4] Sales and Revenue - Overall, the company achieved low single-digit revenue growth of approximately 1% in Q2 2025, which was below internal expectations [3] - The offline channel experienced a low single-digit decline, while the e-commerce channel saw a mid-single-digit growth, although performance during the 618 shopping festival was weak [3][5] Marketing and Brand Strategy - Following the signing of Yang Hansheng, Li Ning plans to launch limited edition products featuring his personal logo, aiming to enhance brand recognition despite short-term challenges in the basketball category [2][7] - The company is focusing on the "Honor Series" product line for the Olympics, with marketing centered around "Olympics plus Technology" [2][8] Inventory Management - Li Ning reported a healthy inventory situation with a turnover rate of approximately 4 months and a stock-to-sales ratio of around 4 [2][10] - The company is monitoring international brand inventory normalization and trends in high-end technology products to adjust its strategy accordingly [9][10] Market Challenges - The overall retail environment remains challenging, with increased discounting pressures leading to a decline in gross margins [2][14] - The company anticipates continued pressure on gross margins for the remainder of the year, making it difficult to maintain the previous year's gross margin level of 49.4% [14] Future Outlook - For H2 2025, Li Ning's marketing efforts will focus on the Olympics, with specific attention on running products that emphasize protection and stability, as well as outdoor products for the autumn and winter seasons [17][18] - The company expects competition to remain fierce in 2026, which could benefit market health but is difficult to predict due to macroeconomic uncertainties [11][12] Financial Strategy - Li Ning has increased its interim dividend and plans to maintain a dividend payout ratio of 50% while exploring other forms of shareholder returns, such as stock buybacks [26] - The company aims to balance revenue growth and discount strategies while maintaining a healthy inventory and managing risks [15][16] Marketing Activities - In H1 2025, Li Ning conducted various marketing activities, including a partnership with the Chinese Olympic Committee and events promoting Olympic culture across multiple cities [25] - The company plans to increase marketing expenditures in H2 2025, particularly due to the Olympic-related activities [23] Product Development - Li Ning is expanding its product lines in niche categories like tennis and pickleball, while the badminton category has shown significant growth, although it remains smaller compared to major categories like running and basketball [21][22] Conclusion - Li Ning is navigating a challenging retail environment with strategic marketing initiatives and a focus on inventory management, while preparing for future growth opportunities in the context of the upcoming Olympics and evolving market dynamics [27]

Group 1 - The Hang Seng Index opened down 0.16% and the Tech Index opened down 0.15% [1] - NIO Inc. (09866.HK) saw an increase of over 4.5% [1] - Li Ning Company Limited (02331.HK) and Nongfu Spring Co., Ltd. (09633.HK) both rose nearly 1.5% [1]