Investment Rating - The report maintains an "Outperform" rating for Li Ning, with a target price of HK$16.00, indicating a potential upside of 6.5% from the current price of HK$15.00 [2][12]. Core Insights - Li Ning's 1Q25 performance was in line with expectations, with a focus on product category expansion in 2025, which is designated as an investment year for the company [1][6]. - The company anticipates flat revenue growth for 2025, with a high single-digit net profit margin, as it invests heavily in brand partnerships and product development around the upcoming Olympic Games [6][12]. - The report highlights a strong performance in the running category, with over 20% growth, while basketball and sports lifestyle categories are experiencing declines [4][11]. Summary by Sections Financial Performance - For 1Q25, Li Ning's revenue growth was low single-digit, with direct channel sales declining due to a reduction in the number of directly managed stores [3][10]. - The company achieved a sell-through rate of approximately 5X in inventory to sales ratio, with improvements in discount rates across various channels [3][10]. Product Development - Li Ning's retail sales mix for 2024 shows running (28%), fitness (15%), basketball (21%), and casual (35%) categories, with respective growth rates of 25%, 6%, -21%, and -6% [4][11]. - New product launches are planned across all categories for 2025, including specialized running shoes and basketball models, with significant sell-out rates reported for certain lines [4][11][12]. Market Strategy - The company has secured partnerships with the Chinese Olympic Committee and plans to enhance its brand presence through sponsorships and collaborations with sports stars [6][12]. - Li Ning's channel adjustments are nearing completion, positioning the company for a potential brand upcycle post-2025 [7][12].

Investment Rating - The investment rating for Li Ning is "Buy" (maintained) [2][6] Core Views - The report indicates that Li Ning's Q1 performance met expectations, with low discount sales improving and strong growth in running and e-commerce segments. The company focuses on professional sports, increasing resource allocation and expanding new products to cater to niche markets and emerging sectors [6][7][9] Financial Summary and Valuation Metrics - For the fiscal year 2023, Li Ning reported a revenue of 27,598 million HKD, with a year-on-year growth of 7.0%. The projected revenue for 2025 is 28,742 million HKD, reflecting a minimal growth of 0.2% [10] - The net profit for 2023 was 3,187 million HKD, showing a decline of 21.6% year-on-year. The estimated net profit for 2025 is 2,459 million HKD, indicating a further decline of 18.4% [10] - The gross margin for 2023 was 48.4%, with a projected gross margin of 49.8% for 2025. The net margin is expected to decrease from 11.5% in 2023 to 8.6% in 2025 [10] - The price-to-earnings (P/E) ratio for 2025 is projected at 14.6, with a price-to-book (P/B) ratio of 1.4 [10] Operational Insights - In Q1 2025, Li Ning's total store count was 6,088, a decrease of 2% year-on-year. The company plans to close 10-20 direct stores and open 30-40 wholesale stores throughout the year [8] - The report highlights that the running category saw over 20% growth, driven by sponsorship of events and strong performance of new running shoe products [7][9]