李宁：FY24E target maintained but we are cautious

Investment Rating - The report maintains a BUY rating for the company, indicating a potential return of over 15% over the next 12 months [2][6][17]. Core Views - The company has slightly exceeded retail sales growth expectations in 3Q24, but there are concerns regarding weak demand and inventory levels for FY24E. A gradual improvement into FY25E is anticipated [2][6]. - The management has reiterated a low-single-digit sales growth and low-teen net profit margin for FY24E, but the report adopts a more conservative stance, projecting only 2% sales growth and an 11% net profit margin [2][6]. - The company is focused on cost savings and efficiency improvements, including reductions in advertising and promotional expenses and store closures, but there are concerns about operating profit margins due to increased retail discounts and fixed operating expenses [2][6]. Financial Summary - Revenue is projected to grow from RMB 28,162 million in FY24E to RMB 30,195 million in FY25E, reflecting a growth rate of 7.2% [3][11]. - Net profit is expected to increase from RMB 3,103 million in FY24E to RMB 3,466 million in FY25E, with a net profit margin of 11.5% [3][11]. - The company’s earnings per share (EPS) is forecasted to rise from RMB 1.19 in FY24E to RMB 1.33 in FY25E [3][11]. Valuation Metrics - The target price for the company has been raised to HK$19.58, based on a 13x FY25E P/E ratio, while the current trading P/E is 11x [4][6]. - The report highlights a dividend yield of 4$15.88 to the target price [4]. - Recent retail sales trends indicate a mixed performance, with e-commerce growth being more resilient compared to offline sales [2][6].