Investment Rating - The investment rating for Li Ning (02331.HK) is "Buy" (首次) [1] Core Insights - The report highlights that despite a weak domestic consumption market and intense competition among sports brands in 2025, Li Ning achieved stable performance through focusing on professional categories and enhancing operational efficiency, exceeding market expectations [3] - For 2026, the outlook is positive with expected revenue growth in high single digits and net profit margin maintaining high single digits, reflecting management's confidence in brand development [3] - The profit forecast for 2026-2027 has been revised upwards, with net profit estimates increased to 3.06 billion and 3.30 billion respectively, and a new estimate for 2028 set at 3.56 billion, corresponding to P/E ratios of 16/15/14X [3] Financial Performance Summary - Total revenue for 2024 is projected at 28.68 billion, with a year-on-year growth of 3.90%, and net profit at 3.01 billion, reflecting a decline of 5.46% [1] - Revenue for 2025 is expected to reach 29.60 billion, with a year-on-year growth of 3.22%, and net profit forecasted at 2.94 billion, down 2.56% [1] - The earnings per share (EPS) for 2024 is estimated at 1.17, with a P/E ratio of 16.19 [1] - The report indicates that the company has regained its status as an official partner of the Chinese Olympic Committee in 2025, which is expected to enhance its brand image [3]

Investment Rating - The report assigns a "Buy" rating for Li Ning (02331.HK) as it is expected to outperform the market in the coming months [1]. Core Insights - The company has demonstrated strong growth in professional categories and improved operational efficiency, leading to better-than-expected performance [3]. - For 2026, the outlook is positive with anticipated revenue growth in the high single digits and a maintained high net profit margin, reflecting management's confidence in brand development [3]. - The forecast for net profit for 2026-2028 has been revised upwards, with expected values of 30.6 billion, 33.0 billion, and 35.6 billion respectively, corresponding to P/E ratios of 16, 15, and 14 [3]. Financial Projections - Total revenue is projected to reach 28.68 billion in 2024, with a year-on-year growth of 3.90%, and is expected to grow to 37.23 billion by 2028, reflecting an 8.11% increase [1]. - The net profit attributable to shareholders is forecasted to be 3.01 billion in 2024, with a slight decline in 2025 to 2.94 billion, before recovering to 3.56 billion by 2028 [1]. - The latest diluted EPS is expected to be 1.17 in 2024, gradually increasing to 1.38 by 2028 [1]. - The P/E ratio is projected to decrease from 16.19 in 2024 to 13.68 in 2028, indicating potential value appreciation [1]. Market Data - The closing price is reported at 21.44 HKD, with a market capitalization of approximately 48.72 billion HKD [6]. - The stock has a price-to-book ratio of 1.76 and has seen a 52-week range between 13.50 and 23.42 HKD [6]. Operational Highlights - The company has successfully controlled sales expenses, leading to a net profit margin of 9.9% in 2025, despite a slight decline in gross margin to 49.0% [9]. - The professional categories, including running and badminton, have shown significant growth, with badminton revenue increasing by 30% and outdoor revenue by 113% [9]. - The company has maintained a healthy inventory level with a turnover ratio of four months, ensuring efficient cash flow management [9].

Core Viewpoint - Li Ning reported a low single-digit decline in overall platform revenue for Q4 2025, excluding Li Ning YOUNG, with offline channels experiencing a mid single-digit decline and e-commerce channels remaining flat. The company maintains a "buy" rating with a target price of HKD 24 based on a 20x PE for 2026 [1][2]. Group 1: Revenue Performance - Overall platform revenue (excluding Li Ning YOUNG) recorded a low single-digit decline year-on-year in Q4 2025, with offline channels (including retail and wholesale) showing a mid single-digit decline [1]. - Retail channels experienced a low single-digit decline, while wholesale channels saw a mid single-digit decline, although retail performance was better than initial expectations due to increased clearance and promotional efforts in the second half of the year [1]. - E-commerce channels remained flat, with notable growth in specific platforms such as Douyin (double-digit growth), JD.com (single-digit growth), and Vipshop (key channel for inventory clearance) [1]. Group 2: Product and Inventory Management - In terms of product categories, running shoes recorded a mid single-digit growth, while sports lifestyle and basketball categories experienced negative growth; outdoor products performed well [1]. - The inventory-to-sales ratio for Q4 was maintained at a healthy level of 4-5, but discounts deepened slightly year-on-year and quarter-on-quarter, currently slightly above the mid-60% range, primarily due to the need for increased discounts to clear inventory in a warm winter [1]. - The company plans to improve revenue performance through product adjustments and optimizations [1]. Group 3: Store Expansion and New Store Formats - As of December 31, the number of Li Ning stores (excluding Li Ning YOUNG) was 6,091, a net decrease of 41 stores from Q3, with a net decrease of 26 stores year-to-date; direct retail stores saw a net decrease of 59 stores, while wholesale stores increased by 33 [1]. - The number of children's clothing stores increased by 38 from Q3, totaling 1,518 stores, with a year-to-date net increase of 50 stores, aligning with the company's planning [1]. - The newly launched "Dragon Store" format has been well-received by consumers, targeting a demographic that values quality and social status, and the company plans to continue expanding this store format and enriching its product line [1].

Investment Rating - The report maintains a "Buy" rating for Li Ning with a target price of 24 HKD, based on a 20x PE for 2026 [1][3][7]. Core Insights - Li Ning's overall platform revenue (excluding Li Ning YOUNG) experienced a low single-digit decline in Q4 2025, with offline channels seeing a mid-single-digit decline while e-commerce growth remained flat [2][3]. - The retail performance outperformed wholesale due to increased clearance and promotional efforts in the second half of the year, with notable growth in specific e-commerce channels like Douyin and JD [2]. - The introduction of new store formats, particularly the "Dragon Store," has been well-received, targeting consumers who value quality and brand prestige, indicating potential for future growth [3]. Financial Summary - Revenue projections for 2025-2027 are adjusted to 28.941 billion RMB, 30.559 billion RMB, and 31.889 billion RMB, respectively, with expected EPS of 1.04, 1.08, and 1.17 RMB [5][11]. - The company anticipates a recovery in profitability with a projected net profit of 2.675 billion RMB in 2025, increasing to 2.787 billion RMB in 2026 and 3.006 billion RMB in 2027 [5][11]. - The gross margin is expected to remain stable around 49.4% for the coming years, reflecting effective cost management [5][12].

Core Viewpoint - Li Ning needs to regain lost time as its recent financial performance shows only a slight revenue increase while profits are declining, especially compared to competitors like Anta and Adidas [1][3] Financial Performance - Li Ning's revenue for the first half of the year reached 14.817 billion yuan, a year-on-year increase of 3.3%, but gross margin decreased by 0.4 percentage points to 50% and operating profit margin fell by 0.2% [1] - In comparison, Anta's revenue was 33.735 billion yuan and Adidas China reported approximately 15.263 billion yuan, indicating Li Ning's significant lag behind its competitors [1] Market Strategy - Li Ning is diversifying its strategy by entering the outdoor market through its family investment in the Swedish outdoor brand Haglöfs, which is expanding its presence in China [3][6] - The outdoor category is showing strong growth in China, with Anta's other brands experiencing retail sales growth of 60%-65% [3][4] Competitive Landscape - Li Ning's core categories of running and basketball are facing challenges, with a 21% decline in basketball revenue for 2024 [3][4] - The outdoor market is becoming increasingly competitive, with various brands like The North Face and Columbia also gaining traction in China [12][14] Brand Positioning - Haglöfs is being positioned as a high-end outdoor brand, similar to how Anta has positioned its brand Arc'teryx, aiming to attract a new generation of consumers seeking high-quality outdoor products [10][12] - Li Ning is not directly managing Haglöfs, which limits the potential for resource sharing and synergy that competitors like Anta enjoy [16] Future Opportunities - Li Ning has the opportunity to enhance its brand image and international presence by becoming a partner for the Chinese Olympic Committee, covering major international events from 2026 to 2028 [16][17] - The company is also focusing on improving operational efficiency and expanding into lower-tier cities to enhance profitability [16]