LI NING(HK:02331)2024-10-24 06:09Investment Rating - The report maintains a neutral rating for Li Ning (2331 HK) with a target price of HKD 14.89, indicating a potential downside of 2.5% from the current closing price of HKD 15.28 [1][2][3]. Core Insights - The third quarter sales were pressured by foot traffic issues, with a low single-digit year-on-year decline in overall retail sales. Offline retail channels experienced a mid-single-digit decline, while online channels showed a middle single-digit growth [1][2]. - The fourth quarter is expected to perform better than the previous three quarters, driven by improved sales metrics and a favorable comparison to last year's low base. The company anticipates a recovery in sales during the National Day holiday, with offline sales achieving low single-digit growth and e-commerce channels experiencing a 30-40% increase [2][3]. - Discount rates are expected to remain under pressure due to poor foot traffic, leading to increased terminal discounting to maintain inventory levels. The management expects this trend to continue into the fourth quarter, although professional categories like badminton and running have shown strong performance [2][3]. Financial Overview - Revenue for Li Ning is projected to grow from RMB 25,803 million in 2022 to RMB 28,196 million in 2024, reflecting a year-on-year growth of 2.2% in 2024 [3][6]. - Net profit is expected to decline from RMB 4,064 million in 2022 to RMB 2,952 million in 2024, with a significant drop of 20.7% in 2023 [3][6]. - The company maintains a gross margin improvement expectation of approximately 1 percentage point for the year, despite the anticipated challenges [2][3].