Core Viewpoint - The company reported stable performance in H1 2025 despite external environmental disturbances, with a slight increase in revenue and gross profit but a decline in net profit [1] Financial Performance - In H1 2025, the company achieved revenue of 14.817 billion yuan, a year-on-year increase of 3.3% - Gross profit reached 7.415 billion yuan, up 2.5% year-on-year - Net profit attributable to shareholders was 1.737 billion yuan, down 11.0% year-on-year - The gross margin for H1 2025 was 50.0%, a decrease of 0.4 percentage points year-on-year, attributed to a decline in direct sales channel revenue and increased discounting - The net profit margin was 11.7%, down 1.9 percentage points year-on-year, due to increased advertising and marketing expenses as the company focused on core resource investment [1] Dividend Policy - The company declared an interim dividend of 0.3359 yuan per share, with a payout ratio of 50%, indicating a strong willingness to distribute dividends [1] Business Segments - E-commerce contributed the largest revenue growth in H1 2025, with a 7.4% year-on-year increase, accounting for 29.0% of total revenue, up 1.1 percentage points from H1 2024 - Revenue from authorized dealers increased by 4.4% year-on-year, making up 46.5% of total revenue, up 0.5 percentage points from H1 2024 - Revenue from footwear products reached 8.231 billion yuan, a 4.9% increase year-on-year, with sales of key running shoe IPs exceeding 5.26 million pairs - Revenue from equipment and accessories grew significantly by 23.7% year-on-year, reaching 1.393 billion yuan, with a revenue share of 9.4% [2] Market Development - The company signed player Yang Hansheng, who was selected in the first round of the NBA draft, which is expected to enhance the company's brand and product sales in the basketball category - Retail sales for running and cross-training categories showed strong performance, both increasing by 15% year-on-year, while basketball retail sales declined by 20% [3] Growth Outlook - The company is positioned as a leading domestic sports apparel brand, focusing on a "single brand, multiple categories, and multiple channels" development strategy - Continued investment in R&D is expected to enhance core technologies in footwear and apparel, maintaining a balance between professionalism and fashion in product design - Profit forecasts for net profit attributable to shareholders are projected at 2.645 billion yuan, 2.845 billion yuan, and 3.104 billion yuan for 2025, 2026, and 2027 respectively [3]

Core Viewpoint - Li Ning's Q2 2025 operational performance shows mixed results, with adult sales under pressure due to a challenging consumption environment and store closures, while e-commerce sales growth has slowed compared to Q1 [1][2][3] Group 1: Sales Performance - Adult sales in Q2 2025 experienced low single-digit year-on-year growth, with offline channel sales declining low single digits and e-commerce sales growing in the mid-single digits [1] - Direct sales channels faced pressure with a year-on-year decline in Q2 2025, attributed to a significant number of store closures in the second half of 2024, resulting in 1,278 direct stores by the end of H1 2025, a net closure of 19 stores compared to the beginning of the year [1] - Wholesale channel sales grew low single digits year-on-year, with 4,821 wholesale stores by the end of H1 2025, indicating a stable performance and potential acceleration in store openings in the second half of the year [1] Group 2: E-commerce and Children's Segment - E-commerce sales growth in Q2 2025 slowed compared to Q1, attributed to a weaker overall sales performance during the 618 shopping festival, with Q2 e-commerce sales growing in the mid-single digits compared to low double digits in Q1 [2] - Li Ning's children's clothing segment, Li Ning YOUNG, is expected to outperform adult sales with steady growth, having 1,435 stores by the end of Q2 2025, a net closure of 33 stores since the beginning of the year [2] Group 3: Financial Outlook - The company is projected to have flat revenue growth in 2025, with a 21% decline in net profit attributable to shareholders, primarily due to increased marketing expenses [3] - Li Ning is focusing on product and marketing strategy optimization, including signing with the Olympic Committee for brand marketing, which may enhance brand influence [3] - The company aims to strengthen its core categories of running and basketball while expanding into other sports categories, which is expected to support long-term growth [3]

Investment Rating - The report maintains an "Outperform" rating for the company [2][7][25] Core Insights - The company has shown a steady recovery in sales during Q1 2025, with overall demand continuing to improve, aligning with expectations [7][8] - The company plans to enhance brand marketing and product innovation, aiming to strengthen its long-term competitiveness [7][8] - The company is expected to maintain its annual performance guidance, projecting flat revenue for 2025 and a high single-digit net profit margin [7][8] Financial Data and Profit Forecast - Revenue projections (in billion RMB): - 2023: 27.6 - 2024: 28.7 - 2025E: 28.8 - 2026E: 30.1 - 2027E: 31.2 - Year-on-year growth rates: - 2023: 7% - 2024: 4% - 2025E: 0% - 2026E: 4% - 2027E: 4% [3][16] - Net profit projections (in billion RMB): - 2023: 3.19 - 2024: 3.01 - 2025E: 2.48 - 2026E: 2.64 - 2027E: 2.78 - Year-on-year growth rates for net profit: - 2023: -22% - 2024: -5% - 2025E: -18% - 2026E: 7% - 2027E: 5% [3][16] Market Data - Closing price as of April 29, 2025: HKD 14.62 - Market capitalization: HKD 37.79 billion - 52-week high/low: HKD 24.60 / HKD 12.56 [4][8] Operational Performance - Q1 2025 sales growth was driven by a strong performance in the footwear category, particularly in running shoes, which saw over 20% growth [7][8] - The company has optimized its channel structure, resulting in a net reduction of 201 direct stores in 2024, with a focus on improving average store productivity [7][8] - Inventory levels remain healthy, with a target inventory turnover ratio of 4-5 months by year-end [7][8] Future Outlook - The company aims to leverage its partnership with the Chinese Olympic Committee to enhance brand visibility and professional image [7][8] - Continued investment in product development and marketing is expected to drive future growth, particularly in the outdoor and new product categories [7][8]