Guoxin Securities·2025-12-27 13:13Investment Rating - The report maintains an "Outperform" rating for Li Ning (02331.HK) [5][7] Core Insights - The Chinese sports and outdoor footwear and apparel market is projected to reach approximately 440 billion RMB by 2025, with a current growth rate of around 6% [1][15] - The company has experienced significant growth in the past, with net profit reaching 4 billion RMB in 2021, but has faced challenges since 2022, leading to a slowdown in revenue growth [2] - Li Ning is focusing on optimizing inventory and channels, with expectations for a rebound in profitability and brand strength due to new product launches and marketing strategies [2][4] Industry Overview - The sports industry is expanding, with a shift towards niche segments. The market structure is changing, with professional sports categories growing faster than fashion sports [1][15] - The competitive landscape is becoming more fragmented, with the market share of the top 10 brands decreasing from 76% in 2019 to 68% in 2025, indicating a rise in domestic brands [1][24] Company Performance Review - Li Ning's revenue growth slowed to single digits from 2022 to 2024 due to inventory and channel issues, but is expected to recover in 2025 with improved profitability [2][4] - The company has seen a significant increase in its direct channel profit margins, which are expected to rise from around 10% in 2023 to mid-double digits in 2025 [3] Product Cycle and Category Expansion - The company is shifting focus from basketball and lifestyle products, which have seen a decline, to running shoes, which are expected to grow at a rate of 25%-45% in 2023-2024 [3][31] - New product lines, including the "Super Capsule" technology for running shoes, are anticipated to drive growth [3][33] Marketing Strategy - Li Ning plans to increase its marketing expenditure from below 10% to low double digits starting in 2025, focusing on Olympic sponsorships and enhancing visibility in running and basketball categories [4][58] - The company is leveraging social media to boost brand engagement and visibility, with significant increases in post frequency and follower counts [4][70] Financial Forecast - The company is projected to achieve net profits of 2.4 billion RMB, 2.7 billion RMB, and 3.1 billion RMB for 2025, 2026, and 2027, respectively, reflecting a recovery trajectory [8][39] - The estimated reasonable valuation range for the company is between 21.20 and 22.30 HKD, corresponding to a PE ratio of approximately 19-20 times for 2026 [7][39]