Investment Rating - The report adjusts the investment rating for Li Ning to "Recommended" based on the company's resilient operational capabilities and strategic execution despite short-term performance pressures [3]. Core Views - Li Ning's revenue for the first half of 2025 was CNY 14.82 billion, a year-on-year increase of 3.3%, while net profit attributable to equity holders decreased by 11.0% to CNY 1.74 billion [1][2]. - The company is expected to maintain stable revenue growth in 2025, focusing on core product categories such as running, basketball, women's sports, outdoor activities, and badminton [3]. - The company aims to enhance its professional sports brand image and prepare for future structural market opportunities with healthy inventory and strong cash flow [3]. Revenue and Profitability - In 2025H1, footwear revenue reached CNY 8.23 billion, up 4.93% year-on-year, accounting for 55.55% of total revenue, while apparel revenue fell by 3.39% to CNY 5.19 billion, representing 35.05% of total revenue [1]. - Gross margin for 2025H1 was 50.0%, a decrease of 0.4 percentage points year-on-year, primarily due to increased discounts in the direct sales channel [2]. - The net profit margin was 11.7%, down 1.9 percentage points year-on-year, affected by higher expenses and impairment losses [2]. Cash Flow and Inventory Management - Operating cash flow for 2025H1 was CNY 2.41 billion, exceeding the current profit, indicating strong cash flow management [2]. - Inventory turnover ratio was 3.6 months, with new products accounting for 87% of the inventory, maintaining a leading position in the industry [2]. Financial Forecast - The company forecasts stable revenue for the full year of 2025, with net profit estimates for 2025-2027 being CNY 2.605 billion, CNY 2.985 billion, and CNY 3.244 billion, respectively [3][4]. - The projected P/E ratios for 2025-2027 are 18.74, 16.36, and 15.05 times, respectively [3].

Core Viewpoint - Li Ning is facing significant challenges, with declining profits and increasing competition from rivals like Anta, prompting a strategic shift towards a more professional sports brand image [1][3][19]. Financial Performance - Li Ning's net profit fell by 5.5% to 3.013 billion yuan in 2024 and further declined by 11.0% to 1.737 billion yuan in the first half of 2025 [1]. - Revenue growth for Li Ning was only 3.9% in 2024, with a further slowdown to 3.3% in the first half of 2025, significantly lagging behind Anta's 13.6% revenue growth [1][19]. Market Position and Strategy - The company is transitioning from a reliance on "national trend" to a focus on "professional sports," aiming to reshape its brand image [4][19]. - Li Ning's strategy includes optimizing its store structure by closing 51 underperforming stores to improve asset quality [1][11]. Product and R&D Focus - In the first half of 2025, Li Ning's R&D investment increased by 8.7%, outpacing revenue growth, with a focus on high-performance running shoes and basketball products [7][8]. - The company is concentrating resources on three core sports areas: running, basketball, and training, while also exploring new categories like outdoor and tennis [7][8]. Marketing and Brand Communication - Li Ning's marketing strategy has shifted to emphasize technology, performance, and athlete stories, moving away from cultural branding [8][19]. - The company has secured partnerships with the Chinese Olympic Committee and prominent athletes to enhance its professional image [8]. Channel Optimization - Li Ning is undergoing a "channel surgery" to focus on high-value locations, closing low-performing stores in lower-tier cities while expanding flagship stores in major urban areas [12][14]. - The average store size has increased to 242 square meters, with a monthly sales contribution of approximately 300,000 yuan from high-tier markets [13]. Leadership and Organizational Changes - Li Ning has appointed Victor Herrero, a former Zara executive, as co-CEO, aiming to leverage his experience in fast fashion to enhance brand performance [16][17]. - The company is exploring a multi-brand strategy, with Herrero's role seen as crucial for integrating Clarks and other brands into its portfolio [17][19]. Future Outlook - Li Ning's transformation is viewed as a "second startup," requiring patience and resilience to navigate internal challenges and external competition [20]. - The success of this strategic shift hinges on the company's ability to convert R&D investments into consumer-recognized value in a competitive market [19][20].

Core Viewpoint - Li Ning's mid-year performance report for 2025 shows a slight revenue growth of 3.3% year-on-year, but a significant decline in net profit by 10.99%, indicating challenges in the consumer market despite strategic investments in professional sports [1][3][19]. Financial Performance - Revenue reached 14.817 billion RMB, up from 14.345 billion RMB in the previous year [2] - Gross profit was 7.415 billion RMB, a 2.5% increase from 7.236 billion RMB [2] - Net profit attributable to shareholders was 1.737 billion RMB, down 11% from 1.952 billion RMB [2][19] - EBITDA increased by 2.0% to 3.512 billion RMB [2] Market Position and Strategy - Li Ning's revenue growth is slower compared to competitors, with Xtep reporting a 7.1% increase and Anta expected to reach 13% [2][3] - The company aims to enhance its investment in sports, particularly in the mass sports sector, and has renewed its partnership with the Chinese Olympic Committee [3][5] - Li Ning has signed contracts with multiple national teams and aims to leverage high-profile events to strengthen its brand positioning [6][9] Product Development and Sales - The company has expanded its product lines to include professional outdoor and lightweight outdoor categories, although these currently contribute a small portion of total revenue [6][8] - Running and basketball are the top two revenue-generating categories, with running sales increasing by 15% and basketball sales declining by 20% [9][10] - Li Ning has launched the Li Ning Running Club to promote a running ecosystem, integrating training resources and professional equipment [8] Challenges and Market Conditions - Despite growth in professional sports, Li Ning faces challenges in the mass consumer market, with declining foot traffic and increased discounts affecting sales [13][17] - The company reported a slight decrease in overall gross margin to 50.0% due to changes in product mix and discounting strategies [17] - Management remains cautious about future performance, anticipating stable revenue but potential pressure on profit margins due to rising costs [19]

Core Viewpoint - The company reported a mixed performance for H1 2025, with revenue growth of 3.3% but a decline in net profit by 11%, indicating challenges in maintaining profitability despite revenue increases [1] Financial Performance - Revenue for H1 2025 reached 14.817 billion yuan, with a gross margin decrease of 0.4 percentage points to 50% due to deeper discounts in direct sales and an increased share of franchise channels [1] - Operating profit increased by 1.5% to 2.438 billion yuan, while net profit fell by 11% to 1.74 billion yuan, primarily due to adjustments in the domestic and foreign funding structure leading to higher tax provisions [1] - The company maintained a dividend payout ratio of 50%, consistent with the previous year, emphasizing shareholder returns [1] Business Segments Offline Business - Wholesale revenue grew by 5% to 6.48 billion yuan, while direct sales revenue declined by 4% to 3.23 billion yuan due to store adjustments aimed at improving profitability [2] - The number of direct and wholesale stores at the end of H1 2025 was 1,278 and 4,821 respectively, reflecting a net closure of 19 direct stores and an addition of 1 wholesale store [2] E-commerce - E-commerce sales showed strong growth with a high double-digit increase, outperforming offline sales, although retail discounts increased by approximately 1 percentage point [2] Product Performance - The company’s adult apparel revenue grew by 2%, with significant growth in running and training categories at 15% each, while basketball and lifestyle categories saw declines of 20% and 7% respectively [3] - The total sales of professional running shoes exceeded 14 million pairs, with key series performing well [3] - The children’s apparel segment also showed positive growth, with offline revenue increasing by 10%-20% and a net closure of 33 stores [3] Cash Flow and Inventory - Operating cash inflow for H1 2025 was 2.411 billion yuan, a decrease of 12%, but the company maintained a healthy cash reserve of 19.191 billion yuan, up 6% from the beginning of the year [3] - Inventory decreased by 7% to 2.4 billion yuan, with a healthy inventory turnover ratio maintained [3] Future Outlook - The company expects revenue for 2025 to remain flat, with a projected decline in net profit by 21.5% due to increased expenses related to Olympic sponsorships [4] - The company is focusing on optimizing product and marketing strategies, with plans to enhance brand influence through Olympic-related activities [4] - Long-term growth is anticipated through the expansion of product categories and improved operational efficiency [4] Earnings Forecast - Projected earnings for 2025-2027 are 2.366 billion, 2.540 billion, and 2.759 billion yuan respectively, with a PE ratio of 20 times for 2025 [5]

Group 1 - The company reported a 3.3% year-on-year increase in revenue for the first half of 2025, reaching 14.82 billion RMB, but experienced a decline in gross margin and net margin due to deeper retail discounts and channel adjustments [1] - The management maintained the annual guidance for 2025, expecting flat revenue and a high single-digit net margin, while acknowledging challenges in the operating environment and increased marketing expenses related to the Olympics [1] - The company is currently in an adjustment period, with uncertainty regarding the recovery pace in the second half of the year, and will continue to monitor sales trends and operational efficiency improvements [1] Group 2 - The offline channel was negatively impacted by continued weak customer traffic, with revenue from direct sales, wholesale, and e-commerce showing year-on-year changes of -3.4%, +4.4%, and +7.4% respectively, indicating online performance was better than offline [2] - The company reduced its store count by 51 to 7,534 by the end of the first half, with a decrease of 19 in direct stores, while maintaining a healthy inventory level with a stock-to-sales ratio of 4 months [2] - The company focused on professional sports categories, with footwear sales increasing by 4.9% year-on-year, while apparel sales declined by 3.4%, and running category sales grew by 15%, supported by strong performance from key running shoe IPs [2]

Core Viewpoint - The company demonstrates a "steady" development approach amidst uncertainties, combining flexibility in strategy with a focus on sustainable growth [1][3]. Financial Performance - In the first half of 2025, the company achieved revenue of 14.82 billion yuan, a year-on-year increase of 3.3% - Gross profit reached 7.41 billion yuan, up 2.5%, with a gross margin of 50% - Net profit stood at 1.74 billion yuan, and cash and cash equivalents totaled 11.8 billion yuan, an increase of 4.3 billion yuan compared to the end of 2024 [1]. Strategic Approach - The company emphasizes a "steady" strategy that is not conservative but involves proactive measures in marketing and operational adjustments [2]. - The management highlights the importance of balancing aggressive marketing investments with systematic control and adjustments in operations [2][3]. Industry Context - The Chinese sports footwear and apparel industry is projected to grow to 598.9 billion yuan by 2025, with an expected annual growth rate of 11.62% from 2021 to 2025 [2]. - The industry is characterized by intense competition, with a multi-brand landscape and a focus on technological innovation and channel integration [2]. Brand Strategy - The company maintains a single-brand strategy, leveraging its founder's athlete background to enhance brand professionalism [4]. - This strategy allows the company to concentrate resources on the "Li Ning" brand, avoiding the risks associated with multi-brand acquisitions [4]. Product Performance - The company reported strong market recognition in categories such as running, basketball, and cross-training, with these categories accounting for 67% of retail sales [5]. - The running category saw a retail sales increase of 15%, with total sales of over 14 million pairs of running shoes in the first half of 2025 [5]. Innovation and R&D - The company has increased R&D investment by 8.7%, outpacing revenue growth, with cumulative R&D investment exceeding 3.8 billion yuan over the past decade [8]. - New technologies, such as the "超䨻" technology, are being developed to enhance product competitiveness [8][9]. Channel Optimization - The company is strategically opening new stores in emerging markets while maintaining high-quality channel standards [10]. - As of June 2025, the total number of stores was 7,534, with a focus on high-level market contributions [10]. Long-term Vision - The company's strategy reflects a commitment to long-term growth, aiming to remain one of China's leading brands over the next decade [12].

Investment Rating - The report maintains a Neutral rating for the company with a target price of HKD 16.28, indicating a potential downside of 10.1% from the current closing price of HKD 18.11 [2][15]. Core Insights - The company reported a steady performance in the first half of 2025, with revenue increasing by 3.3% year-on-year to RMB 14.82 billion. However, challenges are anticipated in the third quarter due to declining foot traffic and increased marketing expenses related to the Olympics [7]. - The management has maintained its full-year guidance for 2025, expecting flat revenue and a high single-digit net profit margin. The company is currently in an adjustment phase, and the recovery pace in the second half remains uncertain [7]. - The company has a healthy inventory level with a stock-to-sales ratio of four months, despite a net decrease of 51 stores to 7,534 by the end of the first half [7]. Financial Overview - Revenue projections for the company are as follows: RMB 27,598 million in 2023, RMB 28,676 million in 2024, and RMB 29,007 million in 2025, reflecting a growth rate of 7.0%, 3.9%, and 1.2% respectively [6][8]. - Net profit is expected to decline from RMB 3,187 million in 2023 to RMB 2,678 million in 2025, with a corresponding decrease in earnings per share from RMB 1.23 to RMB 1.04 [6][17]. - The company’s gross margin is projected to be 49.1% in 2025, down from 48.4% in 2023, while the net profit margin is expected to decrease to 9.2% in 2025 [8][18]. Market Position and Strategy - The company continues to focus on professional sports categories, with footwear sales growing by 4.9% year-on-year, while apparel sales declined by 3.4%. The running category showed strong growth, with sales increasing by 15% [7]. - The management has increased marketing investments, particularly in collaboration with the Chinese Olympic Committee, to enhance the brand's professional image, despite the anticipated rise in marketing expense ratios in the second half of the year [7].

Core Insights - The company reported a revenue of 14.82 billion yuan for the first half of 2025, representing a year-on-year growth of 3.3% [1] - Gross profit reached 7.41 billion yuan, with a gross margin of 50.0%, while net profit was 1.74 billion yuan, yielding a net margin of 11.7% [1] - The company has become the official partner of the Chinese Olympic Committee and the Chinese sports delegation for 2025-2028, launching a marketing campaign titled "China Glory, Li Ning Together" across over 5,200 stores nationwide [1] Financial Performance - Revenue for the first half of 2025 was 14.82 billion yuan, up 3.3% year-on-year [1] - Gross profit was 7.41 billion yuan, with a gross margin of 50.0%, and net profit was 1.74 billion yuan, with a net margin of 11.7% [1] - R&D investment increased by 8.7% year-on-year, with cumulative R&D investment exceeding 3.8 billion yuan over the past decade [1] Product Development - The company focuses on six core categories, including running and basketball, while expanding into new areas like outdoor and tennis [2] - Retail sales in the running category grew by 15%, with over 14 million pairs of professional running shoes sold [2] - The company launched new products utilizing advanced technologies, such as "Ultra Light" and "Aerospace Dry" [1][2] Operational Efficiency - As of June 30, 2025, the company operated 7,534 stores, maintaining a healthy inventory turnover with an inventory turnover period of 61 days [2] - E-commerce direct sales experienced high double-digit growth, while Li Ning Young's offline retail sales grew by 10%-20% [2] - The company has optimized its supply chain, expanding flexible supply capabilities and completing its national logistics network [2] Future Outlook - The company plans to adhere to a "single brand, multi-category, multi-channel" strategy, focusing on product competitiveness and the effectiveness of its Olympic Committee partnership [2] - The company aims to drive long-term sustainable growth through steady operations in the second half of 2025 [2]

Core Viewpoint - Li Ning Company reported a revenue of 14.82 billion yuan for the first half of 2025, reflecting a year-on-year increase of 3.3%, while maintaining a healthy cash flow and manageable inventory levels [1][17]. Financial Performance - The gross profit for the first half of 2025 was 7.41 billion yuan, up 2.5% year-on-year, with an overall gross margin of 50.0% [1]. - The net profit reached 1.74 billion yuan, resulting in a net profit margin of 11.7% [1]. Strategic Initiatives - The company continues to focus on its "single brand, multiple categories, and multiple channels" strategy, emphasizing professional sports and enhancing its operational foundation [1][17]. - Li Ning has become the official partner of the Chinese Olympic Committee and the Chinese sports delegation for 2025-2028, launching the "China Glory, Li Ning Together" marketing campaign across over 5,200 stores [2]. Research and Development - R&D investment increased by 8.7% year-on-year, totaling over 3.8 billion yuan in the last decade [4]. - The proportion of revenue from professional products exceeded 60%, with footwear accounting for 56% of total revenue [4]. Product Performance - The running category saw a 15% increase in retail sales, with over 14 million pairs of running shoes sold, highlighting strong product competitiveness [6]. - The basketball category focuses on professional basketball and has leveraged star athlete endorsements to strengthen market presence [8]. Multi-Category Development - Li Ning is expanding into new sports categories such as outdoor sports, tennis, and pickleball, while maintaining strong performance in core categories like running, basketball, and training [6][11]. - The training category achieved a 15% increase in retail sales, supported by innovative products utilizing aerospace technology [9]. Operational Efficiency - The company maintains a healthy inventory turnover ratio of 4 months and an inventory turnover period of 61 days, indicating strong operational management [13]. - E-commerce operations showed positive growth, with online direct sales increasing significantly, contributing to overall business growth [15]. Supply Chain Optimization - Li Ning is enhancing its supply chain through quality control, delivery assurance, cost optimization, and sustainable practices, achieving significant improvements [17]. - The company has established a nationwide logistics network, with the launch of the Nanning central warehouse marking a key milestone [17]. Future Outlook - Li Ning plans to continue its core strategy of "single brand, multiple categories, and multiple channels," focusing on product competitiveness and operational efficiency to drive sustainable growth [17].

Core Insights - Li Ning Company reported a revenue of 14.82 billion yuan for the first half of 2025, representing a year-on-year increase of 3.3% [1] - The gross profit reached 7.41 billion yuan, with a gross margin of 50.0%, while net profit was 1.74 billion yuan, yielding a net margin of 11.7% [1] - The company maintains strong cash flow and healthy inventory levels, laying a solid foundation for sustainable growth [1] Strategic Focus - The company continues to implement its "single brand, multiple categories, and multiple channels" strategy, emphasizing professional sports and enhancing its operational foundation [1] - Li Ning has become the official partner of the Chinese Olympic Committee and the Chinese sports delegation for 2025-2028, launching the "China Glory, Li Ning Together" marketing campaign across over 5,200 stores [2] R&D and Product Development - R&D investment increased by 8.7% year-on-year, with cumulative investment exceeding 3.8 billion yuan over the past decade [4] - Professional product revenue now accounts for over 60% of total revenue, with footwear representing 56% [4] - New technologies, such as "Aerospace Quick-Dry" and "Aerospace Sun Protection," have been successfully integrated into products, receiving positive market feedback [4] Category Performance - The company focuses on six core categories: running, basketball, cross-training, badminton, table tennis, and sports leisure, with running, basketball, and cross-training accounting for 67% of retail sales [6] - Running category sales grew by 15%, with over 14 million pairs of running shoes sold, and Li Ning shoes achieved a 61.35% market share among runners completing the Beijing Half Marathon in under 90 minutes [6] - Basketball products leverage star athlete endorsements and innovative designs, with Li Ning signing Yang Hansheng, a notable player in the NBA draft [8] Operational Efficiency - Li Ning has optimized its channel structure, inventory management, and e-commerce operations, maintaining a healthy inventory turnover of 61 days and a stock-to-sales ratio of four months [12][14] - E-commerce performance has improved, with online direct sales showing high single-digit growth, contributing significantly to overall business growth [16] - The company has made significant advancements in supply chain optimization, focusing on quality control, delivery assurance, and cost optimization [18] Future Outlook - Li Ning plans to continue its core strategy of "single brand, multiple categories, and multiple channels," aiming for long-term sustainable growth through product competitiveness and operational efficiency [18]