李宁：Conservative guidance but quite expected-20250331

Investment Rating - The report maintains a BUY rating for Li Ning with a new target price of HK$ 19.81, reflecting an upside of 15.4% from the current price of HK$ 17.16 [3][17]. Core Insights - Li Ning's FY24 results were in line with market expectations, with a slight improvement in 4Q24 operating numbers. The company has provided conservative guidance for FY25E, targeting flat sales growth and a high single-digit net profit margin [1][14]. - The management anticipates stable growth in average selling price (ASP) and volume for FY25E, with a focus on improving the lifestyle segment while maintaining growth in running and basketball categories [1][12]. - The report indicates that the worst may be over for Li Ning, as early trends in 1Q25E show improvement, despite the high current valuation [1][14]. Financial Summary - FY24 revenue reached RMB 28.7 billion, a 4% year-on-year increase, while net profit fell by 5% to RMB 3.0 billion, resulting in a net profit margin of 10.5% [2][14]. - For FY25E, revenue is expected to remain flat at RMB 28.7 billion, with a projected net profit of RMB 2.67 billion, reflecting a decline of 11.3% year-on-year [2][12]. - The report revises down net profit forecasts for FY25E and FY26E by 23% and 20%, respectively, due to slower retail sales growth and increased advertising and promotion expenses [1][12]. Earnings Revision - The report shows a significant downward revision in earnings estimates, with FY25E revenue revised down by 5% to RMB 28.68 billion and net profit adjusted down by 22.9% to RMB 2.67 billion [12][13]. - Gross profit margin is expected to improve slightly to 49.6% in FY25E, while operating profit margin is projected to decline to 11.6% due to increased A&P expenses [12][16]. Market Position and Performance - Li Ning's market capitalization is approximately HK$ 44.9 billion, with a P/E ratio of 16x for FY25, which is considered relatively high [5][17]. - The company has a shareholding structure with significant stakes held by Viva China Holdings (10.4%) and GIC Pte Ltd. (5.0%) [6]. Sales Growth and Channel Performance - The report highlights that retail sales growth rebounded to high single digits in 4Q24, improving from a mid-single-digit decline in 3Q24 [14]. - Management expects improvements in retail discounts and a better channel mix, particularly with online sales, which typically yield higher operating margins [1][12]. Segment Performance - For FY25E, management projects a decline in clothing sales by 3% while expecting growth in shoe sales by 1.7% and equipment sales by 5% [16]. - The report indicates that the company is focusing on enhancing its lifestyle segment while maintaining its core categories of running and basketball [1][16].