Summary of Li Ning Company Conference Call Company Overview - **Company**: Li Ning Company - **Date**: July 16, 2025 Key Points Industry Performance - June sales showed a month-on-month decline, with both online and offline channels experiencing negative growth due to base effects, holidays, and weather conditions [2][3] - Discounts deepened in Q2, particularly in e-commerce, impacting direct wholesale channels [2][4] - Overall gross margin faced challenges in the first half of the year, making it difficult to maintain flat margins for the entire year [2][4] Product Performance - Functional products outperformed lifestyle products, with running and fitness categories achieving double-digit growth in H1 2025, while basketball and lifestyle categories performed poorly, particularly basketball sales [2][5] - The growth in H1 was primarily driven by professional categories, with footwear performing better than apparel [2][5] - Key running shoe IPs such as "Ultra Light," "Chi Tu," and "Fei Dian" met expectations, with "Fei Dian" and "Chi Tu" performing well, while "Ultra Light" showed weaker performance [2][5] Strategic Partnerships - Li Ning signed a long-term contract with Yang Hanshen in 2023, planning to quickly launch related products during key competition periods [2][6] - No signature shoe plans currently exist, but future consideration will depend on performance, alongside enhanced personal marketing efforts [2][7] Marketing and Branding - The company is focusing on Olympic-related marketing, with the "Rong Rong Yao" series as a direct product line for the Olympics [3][7] - Future product launches will include more technology-enhanced products, expanding into other functional categories and lifestyle areas [3][7] Retail and Distribution - Approximately 100 new children's clothing stores are planned for this year, primarily targeting mid-to-low tier markets [3][9] - The number of outlet stores remains stable at around 400, with no large-scale openings planned [3][9][10] - E-commerce growth was only in the mid-single digits in Q2, falling short of expectations due to the impact of the 618 shopping festival [3][12] Financial Outlook - The company maintains guidance for flat revenue and a high single-digit net profit margin for 2025, but faces significant challenges in the second half due to weak terminal trends and intense competition [3][29] - Future plans include gradually accelerating revenue growth over the next 3-5 years, aiming for a net profit margin of at least 10% [3][29] Competitive Landscape - The company acknowledges ongoing competition from international brands like Nike, which still holds the largest market share [3][17] - Domestic brands have made significant progress in operations, technology, and design, narrowing the gap with international competitors [3][17] Cost Management - Marketing expenses are expected to rise due to Olympic sponsorship and athlete endorsements, with the marketing expense ratio projected to increase from 9.5% to a low double-digit level [3][18] - Human resource costs are also anticipated to rise slightly due to team expansion and talent acquisition [3][19] Future Strategies - The company plans to optimize store locations to control rental costs and enhance same-store sales [3][21][22] - Product assortments will be adjusted based on market tier and store type to capture business opportunities effectively [3][23][24] Segment Growth Potential - The running category is projected to maintain a 30% share of overall business, with future growth opportunities balanced against risks associated with over-reliance on a single category [3][26][28] This summary encapsulates the key insights from the Li Ning Company conference call, highlighting the current performance, strategic initiatives, and future outlook within the competitive landscape of the sportswear industry.

Investment Rating - The report maintains a "Buy" rating for Li Ning with a target price of HKD 19.2 for 2025, based on a 20x PE ratio [1][4][7]. Core Insights - Li Ning's overall platform revenue (excluding Li Ning YOUNG) recorded low single-digit growth in Q2 2025, with offline channels experiencing low single-digit decline while e-commerce channels saw mid-single-digit growth [2][4]. - The growth in revenue is primarily driven by the running and fitness categories, both achieving high single-digit growth, while the basketball category faced a decline of over 20% due to market conditions [2][3]. - The company continues to optimize its channel structure, with a net decrease of 18 stores year-to-date, and plans to expand new store layouts as per strategy [3][4]. Financial Summary - Revenue projections for Li Ning are as follows: 2025E at RMB 28,698 million, 2026E at RMB 30,498 million, and 2027E at RMB 31,943 million, reflecting growth rates of 0.1%, 6.3%, and 4.7% respectively [5][12]. - The forecasted EPS for 2025 is RMB 0.88, with a decline in net profit expected to RMB 2,269 million, a decrease of 24.7% compared to the previous year [5][12]. - The gross margin is projected to remain stable around 49.2% for 2025, with a slight increase to 49.5% by 2027 [5][13].

Investment Rating - The investment rating for the company is "Buy" (maintained) [5] Core Views - The company's Q2 revenue growth is slightly slower than Q1 but meets expectations, with a small single-digit increase across all platforms [1] - The company has signed a formal agreement with the Chinese Olympic Committee, becoming the official sportswear partner for the Chinese Olympic team from 2025 to 2028, with marketing efforts expected to ramp up starting in May [3] - The company anticipates increased resource investment in professional research and sports sponsorships, aiming for long-term positioning in the sports market [4] Revenue and Profit Forecast - Revenue projections for 2025, 2026, and 2027 are estimated at 28.87 billion, 30.32 billion, and 31.75 billion CNY, reflecting year-on-year growth of 0.7%, 5.0%, and 4.7% respectively [4] - The forecasted net profit for the same years is 2.36 billion, 2.81 billion, and 3.22 billion CNY, with a significant drop of 22% in 2025 followed by recoveries of 19% and 15% in the subsequent years [4] Product Performance - In Q2, the running and cross-training categories continue to lead with high single-digit growth, while the basketball category faced a 20% decline [2] - The company is expected to gradually enrich its product offerings related to basketball, especially with the promotion of the "Yushua" series shoes following Yang Hansheng's selection for the NBA [2] Marketing and Sponsorship - The company has initiated its Olympic marketing strategy with the launch of the "Glory" series products, and further marketing activities are anticipated with upcoming events like the Chengdu World Games and the Milan Winter Olympics [3]

Investment Rating - The report maintains a "Buy" rating for the company [5] Core Views - The company's retail revenue for Q2 2025 showed low single-digit year-on-year growth, consistent with Q1 performance. Offline channels experienced a low single-digit decline, while e-commerce channels grew at a mid-single-digit rate [2][3] - The running and fitness categories continue to outperform, with expected high single-digit growth in revenue for Q2. Basketball remains under pressure, while outdoor and badminton categories are growing rapidly [2][3] - The company is focusing on a stable store strategy, with a net decrease of 18 stores to 6099 by June 30. The company plans to maintain steady expansion in store numbers throughout the year [2][3] - Marketing efforts will focus on themes related to Yang Hansheng and the Olympics, aiming to boost sales in the basketball category and enhance brand recognition [3] Financial Summary - Projected revenue growth for 2025-2027 is 1.7%, 5.3%, and 4.5%, reaching 29.15 billion, 30.69 billion, and 32.07 billion yuan respectively. Net profit is expected to decline by 12.6% in 2025, followed by growth of 6.6% and 6.1% in the subsequent years [3][4] - The company’s earnings per share (EPS) is projected to be 1.02, 1.09, and 1.15 yuan for 2025, 2026, and 2027 respectively, with corresponding price-to-earnings (P/E) ratios of 14.65, 13.75, and 12.96 [4][12] - The company maintains a healthy inventory level despite a challenging consumption environment [3]

Core Viewpoint - The sales trend for the Li Ning brand in Q2 2025 has weakened slightly, falling below the company's expectations, with a low single-digit year-on-year retail revenue growth across all platforms [1][2] Group 1: Sales Performance - In Q2 2025, the online channel outperformed the offline channel, with e-commerce recording a mid-single-digit year-on-year growth, while the offline channel experienced a low single-digit decline [1] - The wholesale channel performed better than the retail channel, with offline wholesale and retail channels showing low single-digit growth and mid-single-digit decline year-on-year, respectively [1] Group 2: Financial Forecasts - Based on more cautious sales assumptions, the company has revised its net profit forecasts for 2025-2027 downwards, with expected revenues adjusted to between 29.0 billion and 30.95 billion RMB, reflecting a decrease of 0.3% to 5.8% [2] - The gross margin and net margin forecasts for 2025-2027 have been lowered by 0.1% to 0.5% and 0.8% to 1.0%, respectively, leading to a revised net profit estimate of 2.68 billion to 3.40 billion RMB [2] Group 3: Market Conditions - The overall industry recovery has been weak, with a strong promotional atmosphere impacting sales, particularly noted during events like the 618 shopping festival [2] - The company anticipates that the sales recovery in the second half of the year will face headwinds due to ongoing industry promotions, which are expected to pressure gross margins [1][2]

Core Viewpoint - Li Ning's Q2 2025 operational performance shows mixed results, with adult sales under pressure due to a challenging consumption environment and store closures, while e-commerce sales growth has slowed compared to Q1 [1][2][3] Group 1: Sales Performance - Adult sales in Q2 2025 experienced low single-digit year-on-year growth, with offline channel sales declining low single digits and e-commerce sales growing in the mid-single digits [1] - Direct sales channels faced pressure with a year-on-year decline in Q2 2025, attributed to a significant number of store closures in the second half of 2024, resulting in 1,278 direct stores by the end of H1 2025, a net closure of 19 stores compared to the beginning of the year [1] - Wholesale channel sales grew low single digits year-on-year, with 4,821 wholesale stores by the end of H1 2025, indicating a stable performance and potential acceleration in store openings in the second half of the year [1] Group 2: E-commerce and Children's Segment - E-commerce sales growth in Q2 2025 slowed compared to Q1, attributed to a weaker overall sales performance during the 618 shopping festival, with Q2 e-commerce sales growing in the mid-single digits compared to low double digits in Q1 [2] - Li Ning's children's clothing segment, Li Ning YOUNG, is expected to outperform adult sales with steady growth, having 1,435 stores by the end of Q2 2025, a net closure of 33 stores since the beginning of the year [2] Group 3: Financial Outlook - The company is projected to have flat revenue growth in 2025, with a 21% decline in net profit attributable to shareholders, primarily due to increased marketing expenses [3] - Li Ning is focusing on product and marketing strategy optimization, including signing with the Olympic Committee for brand marketing, which may enhance brand influence [3] - The company aims to strengthen its core categories of running and basketball while expanding into other sports categories, which is expected to support long-term growth [3]

Company Overview - In Q2 2025, the retail revenue of the Li Ning brand (excluding Li Ning YOUNG) grew at a low single-digit percentage year-on-year, with a net increase of 11 retail points during the quarter [1] - The wholesale channel continued to outperform direct sales, with healthy inventory levels despite pressure on discounts due to market fluctuations [1] - The retail revenue from offline direct sales declined at a mid-single-digit percentage year-on-year, with a net decrease of 13 retail points, while the offline wholesale channel saw low single-digit growth and a net opening of 24 retail points [1] Product Performance - In terms of product categories, the running category saw high single-digit year-on-year growth, although the growth rate slowed compared to Q1 2025, which benefited from sponsorship of events like the Beijing Marathon [1] - The fitness category continued to perform well with high single-digit year-on-year growth, while the sports lifestyle category stabilized with flat year-on-year performance [1] - The basketball category experienced a decline in line with industry trends, while emerging categories such as outdoor and badminton maintained healthy growth [1] Discount and Inventory Management - Discounts in both online and offline channels deepened year-on-year at a low single-digit percentage, but the company maintained a healthy inventory level, with a channel inventory-to-sales ratio of approximately 4x as of the end of June [1] Future Outlook - Since July, retail has continued to fluctuate, with pressure on offline revenue and discounts for the Li Ning brand [2] - In the second half of the year, the company plans to increase marketing and product investment around the theme of "Olympics and Technology," including activities related to Olympic sponsorship and new product launches in various categories [2] - The management maintains guidance for 2025 revenue to be flat year-on-year and a high single-digit net profit margin [2] Earnings Forecast and Valuation - The company maintains its EPS forecasts for 2025 and 2026 at 0.92 and 1.07 HKD respectively, with the current stock price corresponding to 16x and 14x the 2025 and 2026 P/E ratios [2] - The target price remains at 20.82 HKD, implying a 30% upside potential compared to the current stock price, corresponding to 21x and 18x the 2025 and 2026 P/E ratios [2]

Group 1 - The core viewpoint of the article indicates that Li Ning's overall retail revenue for Q2 2025 showed low single-digit growth year-on-year, with offline and e-commerce channels experiencing low single-digit decline and mid-single-digit growth respectively [1] - As of the end of Q2 2025, Li Ning's main brand store count reached 6,099, with a net increase of 11 stores compared to the previous quarter, but a net decrease of 18 stores compared to the end of the previous year [2] - The company signed NBA player Yang Hansheng, which is expected to boost basketball category sales, as basketball sales declined by 20% year-on-year in Q2 2025 [2] Group 2 - Li Ning plans to increase marketing and R&D investments related to the Olympics and technology in the second half of 2025 and into 2026, following its partnership with the Chinese Olympic Committee [3] - The company deepened discounts in Q2 2025 to drive sales, and inventory levels improved with a sales-to-inventory ratio of around 4 months [3] - Profit forecasts for 2025-2027 have been adjusted downwards, with net profits revised to 2.31 billion, 2.60 billion, and 2.93 billion respectively, while maintaining a "buy" rating based on long-term brand development potential [3]

Core Viewpoint - Li Ning is experiencing low single-digit growth in terminal sales for Q2 2025, with management maintaining a revenue guidance of flat growth for 2025, but expecting a decline in profitability [1][3] Sales Performance - Q2 2025 overall sales growth for Li Ning is low single-digit, with offline sales declining in low single digits, while wholesale shows low single-digit growth and online sales exhibit mid-single-digit growth [1] - By product category, running and fitness show high single-digit growth, sports lifestyle remains flat, basketball sees a 20% decline, and outdoor categories perform well [1] - By sales channel, lower-tier markets outperform higher-tier markets, and outlet stores perform better than full-price stores [1] Discounts and Inventory - Due to slowing terminal sales growth and the need for inventory clearance, discount pressure is significant in Q2 2025, with continued pressure expected in the second half of the year; however, inventory levels are currently healthy [1] - Li Ning's overall inventory turnover rate has decreased to approximately 4 months [1] Product and Marketing Strategy - The company is focusing on functional upgrades in products while expanding Olympic themes across multiple categories, including protective and stability features in running, women's products in sports lifestyle, and more outdoor gear [2] - As of June 30, 2025, Li Ning has 6,099 sales points (excluding Li Ning YOUNG), a net increase of 11 from the previous quarter, but a net decrease of 18 from the beginning of the year; Li Ning YOUNG has 1,435 sales points, with a net decrease of 18 from the previous quarter and 33 from the start of the year [2] - Marketing efforts will focus on the Olympics and technology, with sponsorships and athlete collaborations to enhance brand influence, alongside continued support for marathon events [2] Financial Forecast and Investment Recommendation - As a leading domestic sports footwear and apparel brand, Li Ning is expected to face revenue and profit pressures due to weak consumer demand and intensified market competition; revenue projections for 2025-2027 are 28.74 billion, 29.96 billion, and 31.11 billion yuan, with growth rates of 0%, 4%, and 4% respectively [3] - Net profit projections for the same period are 2.38 billion, 2.53 billion, and 2.72 billion yuan, with year-on-year growth rates of -21%, 7%, and 7% respectively; the current stock price corresponds to a 25 PE of 15.5X, maintaining a strong buy recommendation [3]

Core Viewpoint - Company reported low single-digit growth in retail sales for the second quarter ending June 30, 2025, with a decline in offline channels and a significant increase in e-commerce sales [1][2][3] Retail Performance - As of June 30, 2025, retail sales points (excluding Li Ning YOUNG) totaled 6,099, a net increase of 11 from the previous quarter but a net decrease of 18 year-to-date, with retail business down by 19 and wholesale business up by 1 [1] - E-commerce virtual store business recorded a mid-single-digit growth, while offline channels saw a low single-digit decline [1][2] Sales and Discounts - The overall sales revenue for Li Ning in the second quarter showed low single-digit growth, with e-commerce performing better than offline sales [3] - Retail discounts increased, leading to pressure on margins, but the inventory-to-sales ratio improved to a four-month high [3][4] Marketing Strategy - Marketing efforts are focused on two main themes: NBA (with player Yang Hansheng) and the Olympics, with a significant increase in marketing expenses expected in the second half of the year [2][3] - The company aims to leverage the NBA and Olympic themes to enhance brand visibility and drive sales growth [3][4] Financial Outlook - The company maintains its profit forecast, expecting net profits of 2.51 billion, 2.83 billion, and 3.04 billion yuan for 2025-2027, reflecting year-on-year changes of -16.8%, +12.8%, and +7.6% respectively [2][4] - Target price is set between 17.9 and 19.2 HKD, corresponding to a 2025 PE ratio of 17.2-18.5x, with a rating of "outperform" [2][4]