LI NING(02331) 华兴证券·2024-07-10 01:31Investment Rating - The report maintains a Buy rating for Li Ning (2331 HK) with a target price of HK15.50 [1] Core Views - Li Ning's 1H24 revenue is expected to grow by 2.0% YoY to RMB 14.3 billion, while net profit attributable to shareholders is expected to decline by 14.9% YoY to RMB 1.81 billion [1] - For the full year 2024, revenue and net profit are forecasted to grow by 5.2% and 5.1% YoY, reaching RMB 29.03 billion and RMB 3.35 billion, respectively [1] - The company is expected to maintain a gross margin of 49.4% in 1H24, up 0.6 percentage points YoY, driven by improved discount rates [1] - Li Ning is focusing on expanding its product line in the RMB 399-599 price range and adopting a "one county, one strategy" approach to penetrate lower-tier cities [1] Financial Performance Summary - Revenue is projected to grow from RMB 27.6 billion in 2023 to RMB 32.6 billion in 2026, with a CAGR of 5.7% [1] - Net profit is expected to increase from RMB 3.19 billion in 2023 to RMB 4.02 billion in 2026, with a CAGR of 8.1% [1] - The company's gross margin is forecasted to improve from 48.4% in 2023 to 50.0% in 2026 [2] Valuation - The target price of HK$26.55 implies a 17x 2025 P/E ratio [1] - Current valuation metrics show a 2024E P/E of 10.9x, P/B of 1.4x, and P/S of 1.3x [2] Industry Outlook - The report assigns an Overweight rating to the Consumer Durables & Apparel sector, indicating expected outperformance relative to the market [1] Key Drivers - Li Ning's running shoe matrix is performing well, with continued iterations of flagship products like Jueying and Dilu [1] - The company is adjusting its basketball shoe offerings to cater to the consumption downgrade trend, introducing products priced between RMB 499-699 [1] - Channel reforms are underway, with a focus on expanding in lower-tier cities through tailored strategies [1]