2025-06-09 01:42Summary of Li Ning Co. (2331.HK) Corporate Day Insights Company Overview - Company: Li Ning Co. (2331.HK) - Industry: Consumer & Leisure Key Points and Arguments 1. Financial Guidance and Performance - Management reiterated FY2025 guidance with expectations of flat year-over-year sales and a net profit margin (NPM) growth at high single digits (HSD%) [2][7] - The company anticipates challenges to gross profit margin (GPM) due to ongoing discount pressures throughout the year [2][10] 2. Sales Trends - Year-to-date (YTD) trading and operational expenditure (OPEX) investments are largely on track, with inventory levels under control [2] - Positive growth in online and offline sales was recorded in April, while offline sales declined initially but turned positive during May and the Dragon Boat Festival [2][10] - Discounts have deepened, with management expecting similar trends during the 618 festival [2][10] 3. Category Performance - The adult business is expected to see small positive growth, while adjustments in the kids' wear segment and the international business transitioning to a joint venture (JV) will offset this growth [2] - The running category showed over 20% year-over-year growth in Q1 2025, driven by the popularity of core products [11] - The outdoor category is identified as a growth driver, with expectations of low to mid-single digit (LSD-MSD%) contribution for the year [11] 4. Store Network and Strategy - Plans to close 10-20 directly-operated adult stores while increasing distributor stores by 30-40 to target third-tier cities [10] - The company aims to net open 100 Li Ning Young stores in 2025, focusing on higher-tier cities through direct-to-consumer (DTC) channels [10] 5. Marketing and Sponsorship - Marketing efforts will focus on events and athlete sponsorships, particularly in relation to the Milan Winter Olympics in 2026 [10] 6. Shareholder Returns - The company has been gradually increasing shareholder returns and sees potential for further improvement, considering dividends based on free cash flow (FCF) [12] 7. Risks and Valuation - The current price target is set at HK$14.5, with a neutral rating based on a 12x 2026E price-to-earnings (P/E) ratio [13] - Key risks include slower or higher-than-expected same-store sales growth (SSSG), promotional activities, and operational expenditures on brand investments [13] 8. Additional Insights - The company is facing challenges in the basketball and lifestyle categories, with unclear demand trends among younger consumers [11] - The management expects a decrease in store-related right-of-use (ROU) asset impairments in 2025, although investment property impairments may vary based on asset revaluation [10] Conclusion Li Ning Co. is navigating a complex retail environment with a focus on maintaining sales growth amidst discount pressures. The company is strategically adjusting its store network and enhancing its marketing efforts to bolster its position in key categories while managing shareholder expectations through potential returns.