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]

Investment Rating - The report maintains a "Buy" rating for Li Ning with a target price of HKD 19.2 for 2025, based on a 20x PE ratio [1][4][7]. Core Insights - Li Ning's overall platform revenue (excluding Li Ning YOUNG) recorded low single-digit growth in Q2 2025, with offline channels experiencing low single-digit decline while e-commerce channels saw mid-single-digit growth [2][4]. - The growth in revenue is primarily driven by the running and fitness categories, both achieving high single-digit growth, while the basketball category faced a decline of over 20% due to market conditions [2][3]. - The company continues to optimize its channel structure, with a net decrease of 18 stores year-to-date, and plans to expand new store layouts as per strategy [3][4]. Financial Summary - Revenue projections for Li Ning are as follows: 2025E at RMB 28,698 million, 2026E at RMB 30,498 million, and 2027E at RMB 31,943 million, reflecting growth rates of 0.1%, 6.3%, and 4.7% respectively [5][12]. - The forecasted EPS for 2025 is RMB 0.88, with a decline in net profit expected to RMB 2,269 million, a decrease of 24.7% compared to the previous year [5][12]. - The gross margin is projected to remain stable around 49.2% for 2025, with a slight increase to 49.5% by 2027 [5][13].

Core Viewpoint - In a challenging market environment in 2024, Li Ning Company reported a solid performance with a revenue of 28.68 billion yuan, a year-on-year increase of 3.9%, and a gross profit margin improvement of 1 percentage point [1] Financial Performance - Revenue for 2024 reached 28.68 billion yuan, up 3.9% year-on-year - Gross profit increased by 6.0% to 14.16 billion yuan - Operating cash flow grew by 12.4% to 5.27 billion yuan - Cash reserves increased by 2.06 billion yuan to 7.5 billion yuan - Dividend payout ratio rose to 50% [1] Strategic Focus - The company maintains a "single brand, multiple categories, and multiple channels" strategy, which has been crucial for sustaining operational quality in a challenging market [1] - Li Ning emphasizes that "steady operation does not mean conservative operation," indicating a proactive approach to business management [1] Product Categories and Market Position - Li Ning focuses on a single brand strategy while deepening its multiple product categories, including running, basketball, training, badminton, table tennis, and lifestyle sports [3] - In 2024, running, basketball, and training categories accounted for 64% of total sales [3] - The running category saw a retail sales increase of 25% in 2024, with significant sales of core running shoe lines [4] Inventory and Channel Management - Li Ning has optimized its inventory management system, maintaining a healthy inventory turnover ratio of 4 months and controlling inventory turnover days at 64 days [6] - The company has a total of 6,117 brand stores and 1,468 Li Ning YOUNG stores as of the end of 2024, with ongoing efforts to explore innovative channel models [6] Professional Sports Engagement - Li Ning has strengthened its position in professional sports by becoming the official partner of the Chinese Olympic Committee and supporting various national teams [7][8] - The company’s long-term partnerships with elite sports teams have contributed to its professional credibility and market presence [7][8]