EQUITY: CONSUMER RELATED Not the time to revisit yet FY24 results in line; FY25F sales and earnings to face headwinds; downgrade to Neutral FY24 results largely in line; continued headwinds for FY25F Li Ning announced its FY24 results (on 28 March), largely in line with the capital market's expectation: 2H24 revenue increased by 6% y-y to CNY14.3bn, 3% ahead of Bloomberg consensus, while its 2H24 net profit decreased by 0.4% y-y to CNY1.06bn, 3% lower than consensus; excluding one-off gains & losses, Li Nin ...

EPS (UBS, diluted) (Rmb) ab 28 March 2025 Fast Take Li Ning Headline H224 OP better than expectations Our Take H224 NI largely in line with UBSe. H224 OP was 5% higher than UBSe from higher revenue (4% above) and better GPM (0.7pppt higher) partially offset by Rmb333mn impairment of investment properties. Excluding that, H224 OP was 32% higher than UBSe. Global Research Equities China Footwear 12-month rating Neutral 12m price target HK$15.90 Price (27 Mar 2025) HK$17.10 RIC: 2331.HK BBG: 2331 HK Trading da ...

Core Viewpoint - The research service "Asia Value & Moat Stocks" targets value investors looking for Asia-listed stocks that exhibit a significant disparity between market price and intrinsic value, focusing on deep value balance sheet bargains and wide moat stocks [1] Group 1: Investment Focus - The service emphasizes deep value balance sheet bargains, which include net cash stocks, net-nets, low price-to-book (P/B) stocks, and sum-of-the-parts discounts [1] - It also highlights wide moat stocks, which are characterized by strong earnings power at a discount, including high-quality businesses and hidden champions [1] Group 2: Market Emphasis - The primary focus of the investment ideas is on the Hong Kong market, providing a range of watch lists with monthly updates for investors [1]

Summary of Conference Call Company Overview - The meeting was structured with a financial review for mid-2024 presented by the CFO, followed by a strategic direction overview from the Chairman, and operational progress and outlook from the COO, concluding with a Q&A session [1] Key Points - The CFO provided insights into the financial performance for the first half of 2024, highlighting key metrics and trends [1] - The Chairman outlined the company's strategic initiatives aimed at enhancing market position and driving growth [1] - The COO discussed operational advancements and future expectations, emphasizing efficiency improvements and potential challenges [1] Additional Important Content - The meeting format encouraged engagement through a Q&A session, allowing stakeholders to address specific concerns and inquiries [1]

Investment Rating - The report maintains a Neutral rating on Li Ning Co. with a 12-month price target of HK$23, indicating an upside potential of 11.7% from the current price of HK$20.60 [3][9][8]. Core Insights - Management reiterated guidance for a mid-single-digit (MSD) revenue growth driven by volume growth and a low teens percentage for net profit margin (NPM) in 2024 [2][4]. - The company showcased its capabilities in R&D during a recent Technology Show, launching upgraded technologies and new products that received positive market feedback [3][6]. - Running is expected to be the primary growth driver for the year, supported by enhanced technology and a broader product portfolio, while basketball products will see controlled volume and extended product lifecycles [6][3]. Summary by Sections Full Year Outlook - Management expects revenue growth to be driven by volume, with gross profit margin (GPM) expanding year-over-year due to improved discount levels [4][6]. - SG&A expenses are anticipated to rise in the first half of 2024 due to a low base in the previous year [4][6]. Recent Trends - The topline performance in April and May mirrored that of the first quarter, with an improved discount level in offline channels, aligning with 2022 levels [6][2]. - Online sales continue to outperform offline sales [6]. New Product Launches - The Technology Show introduced new technologies such as rainstorm-proof and Super Beng, along with the Jueying 3 product, which has received positive feedback [6][2]. - Upcoming product launches include upgraded versions of Yueying and Dilu shoes, as well as outdoor products leveraging new technologies [6]. Category Performance - Running is projected to be the most significant growth driver, with expectations of decent growth in training products and controlled volume for basketball products [6][3]. Share-Based Incentive Plan - A revised share-based incentive plan was introduced, focusing on profit as a key performance indicator (KPI) and adjusting the vesting period to 36 months [6][3]. Capital Expenditure - Management anticipates capital expenditures exceeding RMB 4 billion for the year, significantly higher than normal years, due to specific investments [6].

Financial Data and Key Metrics Changes - Overall business trend is in line with expectations, with online performance outperforming offline channels. Offline pressure remains significant due to high base last year, with no clear signs of relief observed [2][9] - Inventory is at a healthy level, with a sell-through ratio of approximately four months at the end of Q1, and new products accounting for 80%-90%, aiding in discount optimization and gross margin improvement [10] Business Line Data and Key Metrics Changes - Running category showed the best growth in Q1, followed by fitness, while basketball faced pressure due to high market penetration and intense competition [4][11] - The company plans to launch more new products in the second half of the year, including the second generation of the Lu series and outdoor products featuring anti-rain dual-channel nano technology [5][12] Market Data and Key Metrics Changes - Sales of running shoes and basketball shoes in lower-tier cities met expectations, with a core price range of 400-600 RMB [7][20] - The children's business faced pressure in Q1, with plans to open 150 new stores throughout the year [21] Company Strategy and Development Direction - The technology showcase is the first step in the Olympic cycle marketing activities, with more technology and product launches planned [5][11] - The company aims to optimize business fundamentals such as discounts, sell-through rates, and inventory in the basketball category, while also focusing on expanding into new demographics, particularly youth through basketball training and event sponsorship [19][22] Management's Comments on Operating Environment and Future Outlook - Management noted that offline traffic pressure is primarily due to a decrease in customer flow, with expectations for some relief in the second half of the year [10][17] - The company emphasizes quality over quantity in sales, prioritizing profit and discount management rather than aggressive clearance sales [18] Other Important Information - The design team structure is stable, categorized by product lines, with clear KPIs and incentive mechanisms for designers [8][15] - The company maintains a flexible shipping schedule for distributors, with no changes to ordering methods and return policies [6][15] Q&A Session Summary Question: How is the company's recent operating situation? What are the differences between online and offline performance? - The overall business trend is in line with expectations, with online performance outperforming offline. Offline market pressure is significant due to last year's high base, with no clear signs of relief currently [9] Question: What is the current inventory situation? How does inventory level affect gross margin? - Inventory is at a very healthy level, with a sell-through ratio of about four months and a high freshness of new products, aiding in overall discount optimization and gross margin recovery [10] Question: How is the performance of footwear and apparel categories in Q2? Which key products performed well? - The marketing focus for footwear this year is strong, especially in functional categories, with running showing the best growth in Q1 [11] Question: What are the key products and marketing plans for the second half of the year? - The company will launch the second generation of the Lu series and introduce outdoor fabric technology, with more outdoor products planned for release [12] Question: How does the company view the performance of the basketball category and future plans? - The basketball category has seen slower growth recently due to high penetration and intense competition, with a focus on optimizing business fundamentals and introducing new products [19]