Guoxin Securities: Maintaining Li Ning's (02331) “superior to the market” investment rating reasonable valuation range of HK$21.20-22.30

The Zhitong Finance App learned that Guoxin Securities released a research report saying that they are optimistic about Li Ning (02331) brand recovery to drive new growth opportunities. The company's net profit for 2025-2027 is estimated to be 2.4 billion yuan/2.68 billion yuan/3.06 billion yuan respectively. We are optimistic that subsequent new products and marketing strategies will drive performance. Taking into account the company's operating reversal expectations as a leading local sports brand, long-term profit growth potential, and abundant cash reserves, the company maintained a reasonable valuation range of HK$21.20-22.30, corresponding to a price-earnings ratio of about 19-20 times in 2026, and maintained a “superior to the market” investment rating.

Guoxin Securities's main views are as follows:

Sports industry: continuous expansion, sector segmentation

China's sports and outdoor footwear industry has a market size of about 440 billion yuan in 2025. After experiencing rapid growth before the epidemic and fluctuations in the epidemic, the growth rate has now slowed to about 6%. At the same time, the internal structure has changed significantly: 1) The growth of professional sports categories is stronger than fashion sports, including strong growth in fields such as running, outdoor, and segmented ball sports, but the basketball market is under pressure; 2) The brand pattern is moving from concentration to diversification. From 2019 to 2025, the industry CR10 dropped from 76% to 68%, and the trend of domestic products rising to dominant categories occurred.

Company's recent situation review: the collapse and revival of the “Guochao Standard-bearer”

In 2019-2021, the company's product strength and brand strength resonated with Guochao dividends, and its net profit in 2021 reached 4 billion yuan, equivalent to 5.6 times that of 3 years ago; in 2024, with Guochao cooling and macroeconomic pressure, the company's channel structure and inventory problems became prominent. Entering an adjustment period, revenue growth slowed to single digits, and net interest rate fell from high double digits to around 10%; in 2025, after inventory control and channel optimization, the operating profit margin of the company's direct channel bottomed out, and at the same time took back the 2028 Olympic core marketing cycle Resources, new products, and new store types are also starting to work at the same time, which is expected to revive the brand's potential. At the equity level, the Li Ning family continued to increase their holdings through Extraordinary Leadership. The shareholding ratio rose from 11.23% to 14.27%, demonstrating long-term confidence.

Product cycle: fashion decline, professional strength, category refinement and new opportunities

In the last round of rising brand power, the company's dominant categories were basketball and sports life, which declined sharply in recent years, from a peak of 71% in 2021 to 46% in the first half of 2025; the running category rose strongly, with a growth rate of 25%-45% in 2023-2024, accounting for 34%, making it the company's largest category. After experiencing a sharp drop in volume and price, the price of the company's basketball shoes gradually stabilized, and sales of the new IP series increased; the running shoe matrix continued to expand, and the “Super Capsule” technology released at the end of 2025 is expected to boost the continued growth momentum of running shoes. At the same time, the company launched the “Honor Gold Standard” series and outdoor series, covering the diverse needs of pan-sports life and injecting new volume into the category.

Channel layout: The adjustment is showing initial results, and the refinement of the circle is expected to open up incremental markets

Starting in 2024, the company took the initiative to reduce the size of direct-run stores and control the store area, driving the direct operating profit margin back from a low of about 10% in 2023 to the middle double digits in the first half of 2025. The wholesale channel remained stable, and the number of franchised stores increased slightly, reflecting the gradual restoration of dealer confidence. At the end of 2025, the company launched a “dragon store” incorporating Olympic elements and an outdoor specialty store to accurately enter the market through store segmentation. If brand potential recovers, improvements in store efficiency and discount rates in existing stores are expected to leverage operating leverage and drive a new round of channel expansion.

Strong marketing: from “heavenly dividends” to active attacks, initial results are showing

Li Ning's marketing expenses rate has been below 10% over the past few years. Starting in 2025, the marketing resource support direction includes: signing up with the Chinese Olympic Committee to target 2025-2028 core Olympic resources; increasing investment in the running category to enhance new product exposure through marathons and elite athletes; and the growing influence of basketball ambassadors Yang Hansen and Jimmy Butler, which is expected to fill the marketing gap after Wade's retirement. Social media operations are being strengthened simultaneously, and the number of official account posts and fans is growing at the same time as “planting grass” interactive data.