Investment Rating - The report maintains a "Buy" rating for Li Ning with a target price of HK$23.30, indicating a potential upside of 15% from the current price of HK$20.28 [2][3]. Core Views - The report highlights that Li Ning's 1H25 performance met expectations, with revenue of RMB 14.817 billion, a year-on-year increase of 3.3%. The gross margin was 50%, slightly down by 0.4 percentage points due to intensified promotional competition in direct sales channels [5][6]. - The report notes that while direct sales did not meet expectations, e-commerce revenue increased, leading to a rise in related expenses. The net profit for 1H25 was RMB 1.737 billion, down 11% year-on-year, with a net profit margin of 11.7% [5][6]. - The report emphasizes that all product categories and channels are performing well, with footwear revenue up 5% and accessories revenue up 24%, while apparel revenue declined by 3% [6][8]. Summary by Sections Financial Performance - Li Ning's revenue for 1H25 was RMB 14.817 billion, with a gross margin of 50%. The net profit was RMB 1.737 billion, reflecting an 11% decline year-on-year [5][6]. - The report projects revenue for 2025 to be RMB 28.686 billion, with a net profit of RMB 2.403 billion, representing a year-on-year decrease of 20.2% [9][12]. Operational Insights - The report indicates a balanced development between online and offline channels, with e-commerce revenue accounting for 31% of total revenue, up 1 percentage point year-on-year. Direct sales revenue decreased due to a reduction in store numbers [6][8]. - The report mentions that Li Ning plans to enhance its outdoor product lines and expects to introduce approximately 5,000 stores for outdoor categories by the end of the year [7][8]. Valuation and Forecast - The report maintains the earnings forecast for Li Ning for 2025-2027, expecting revenue growth of 0.0% in 2025, 2.0% in 2026, and 1.8% in 2027. The net profit is projected to decline by 20.2% in 2025 but recover slightly in the following years [8][9]. - The report assigns a P/E ratio of 22 times for 2026, raising the target price by 21% to HK$23.30, which still offers a 15% upside from the current price [8][9].

Core Viewpoint - Li Ning's stock has seen a significant increase, with a nearly 6% rise, attributed to better-than-expected mid-term performance results [1] Financial Performance - Li Ning reported a revenue increase of 3.3% year-on-year to 14.817 billion yuan [1] - Gross profit was approximately 7.415 billion yuan, reflecting a year-on-year growth of 2.48% [1] - EBITDA was around 3.513 billion yuan, showing a 2% increase compared to the previous year [1] - Net profit reached approximately 1.737 billion yuan, with basic earnings per share at 67.43 cents [1] - The interim dividend declared was 33.59 cents per share [1] Market Expectations - Nomura noted that Li Ning's key performance indicators exceeded market expectations for the first half of the year [1] - Daiwa indicated that Li Ning's net profit margin was slightly better than their expectations, alleviating concerns regarding management's lowered guidance [1] Strategic Outlook - Dongwu Securities projected that Li Ning will continue to deepen its "single brand, multiple categories, and multi-channels" strategy in the second half of the year [1] - The company plans to enhance its professional sports resources through collaboration with the Chinese Olympic Committee [1] - Li Ning has restructured its internal organization to focus on a category-based business model, improving category management efficiency [1] - The company aims to expand into multiple categories such as table tennis, badminton, pickleball, tennis, and golf [1] - With a solid operational foundation and healthier channel inventory, Li Ning is expected to benefit from Olympic-themed marketing, potentially enhancing performance elasticity [1]