in the big year of sports,li ningit seems to have lost its former "radicalism".

as a leading enterprise of the "national trend", li ning has achieved the ultimate in "forbearance" and "low-key" after the trend. looking back at the road we have traveled, in the more than 30 years since li ning started its business, there have been lows and highs, but what has supported li ning company through the darkest moments, apart from luck, is the persistence in sports products.

someone once said that a great product is the best reflection of a great company.

so, someone once asked li ning, what is li ning?

li ning, the founder of li ning company, replied seriously, "i founded li ning company with the goal of creating a professional sports brand that can serve the development of china's sports industry."

ideals are beautiful, but the capital market is cruel.

ultimately, the company's future vision will have to be tested by the market.

in mid-august, li ning released its 2024 interim performance report. the financial report showed that in the first half of the year, li ning achieved revenue of 14.345 billion yuan, a slight increase of 2.3% year-on-year; net profit attributable to shareholders was 1.952 billion yuan, a year-on-year decrease of 7.97%; the company's cash flow from operating activities was 2.730 billion yuan.

from li ning's financial report, we can clearly see that li ning has begun to fall into a vicious circle of "increasing revenue but not increasing profits". of course, for the footwear industry, increasing revenue but not increasing profits often means that the company is about to enter a recession.urban beauty、la chapelle, have all quickly fallen from the altar due to the scale effect.

on august 27, anta, the leader in the sporting goods industry, released its financial report for the first half of 2024. the report showed that anta's revenue in the first half of the year was 33.735 billion yuan, a year-on-year increase of 13.8%; net profit attributable to the parent company was 7.721 billion yuan, a year-on-year increase of 62.6%. on the same day, anta also announced a large repurchase plan. according to the announcement, anta intends to use no more than hk$10 billion to repurchase shares on the open market from time to time within 18 months from the date of the announcement.

anta also said it will fund the share repurchase plan from its existing available cash reserves, and any shares repurchased under the share repurchase plan will be cancelled.

the difference is obvious in comparison.

in fact, the market has already reflected the performance in advance.

according to relevant statistics, li ning has fallen by 30% this year, while anta has not fallen, but has slightly increased by 0.5%. if calculated from the highest point, anta's decline is about 60%, while li ning's decline is more than 85%. from the highest point, li ning's market value has evaporated by more than hk$237 billion, or about rmb 216.3 billion, leaving a market value of only hk$36.5 billion, or about rmb 33.3 billion.

li ning's "stalling"

after li ning released this financial report, the market actually did not give full recognition.

faced with the slowdown in performance growth, li ning group co-ceo qian wei admitted at the performance briefing that this year's core goal is not to increase scale, and "steady operation and pragmatic development" is the guiding ideology.

qian wei also said that on the one hand, from the perspective of revenue, li ning will try its best to effectively layout opportunities at different levels of the market, for different groups of people, and for different categories; while controlling risks, corresponding predictions of revenue must be made.

obviously, li ning's management also realized that raising prices cannot solve all problems, and the problem of high inventory must also be solved.

in fact, after 2018, li ning took advantage of the "national trend" and became synonymous with the national trend. standing on the cusp of the trend, li ning quickly joined the 10 billion yuan revenue club and established a firm foothold.

according to statistics, as the biggest winner behind the national trend, in 2018, the sales volume of "china li ning" series clothing exceeded 5.5 million pieces, and the sales volume of shoes exceeded 50,000.

driven by this "national trend", li ning's revenue and net profit have been rising steadily. in terms of performance, li ning's annual revenue in 2018 was 10.51 billion yuan and its net profit was 715.3 million yuan; by 2022, li ning's revenue had grown to 25.803 billion yuan and its net profit had grown to 4.064 billion yuan. in four years, li ning's revenue has doubled, and its net profit has more than quintupled. for a traditional industry like textiles and clothing, such a performance growth rate is a miracle.

in terms of stock price, li ning also rose from a low of hk$2.91 per share in 2018 to a high of hk$106.1 per share. in just three years, the stock price skyrocketed by more than 3,600%, and the market value exceeded the hk$270 billion mark.

but it is worth noting that as product prices get higher and higher, consumers are increasingly complaining.

after the national trend, the most intuitive feeling of the public about li ning products is that they are "getting more and more expensive". under the rising prices, consumers finally chose to vote with their feet. therefore, after 2022, li ning's performance growth began to stagnate, and in 2023, the growth rate even declined. by 2024, its performance growth rate was only 2.3%. not only that, its net profit has begun to decline.

judging from its performance, li ning has already "lost momentum", and its performance is far behind that of the leadinganta sportsthe gap is getting bigger and bigger.

of course, li ning has already experienced a big trough. in response to the market reaction, li ning has been creating "new stories", but it has not been able to reap the previous results.

it is worth noting that while the growth rate of performance is declining, li ning's inventory is also rising. according to the financial report, from 2020 to 2023, li ning's inventory has risen from 1.346 billion to 2.493 billion; in the first half of 2024, its inventory is as high as 2.313 billion, setting a new high in recent years, which shows the great inventory pressure.

qian wei, co-ceo of li ning group, said:"in the first half of this year, although the external market environment has been constantly changing and offline sales have also faced certain challenges, the overall inventory management level and goals of li ning group have remained in a very healthy and stable state. our core idea is not to solve problems after inventory problems occur, but to solve some of the previous causes that may bring inventory risks as soon as possible before inventory problems are likely to occur."

market feedback

the problems caused by the "stalling" in performance are obvious.

the most intuitive reaction is the drop in stock prices.

of course, the rise and fall of stock prices are affected by many factors, but in a mature market like the hong kong stock market, performance is the most core factor in the market's judgment of a company.

in order to boost the stock price, li ning also thought of many ways. for example, in order to break the growth dilemma, li ning increased marketing expenditure.

according to the financial report, li ning's advertising and marketing expenses increased by 19.8% year-on-year in the first half of 2024, reaching 1.249 billion yuan, accounting for 8.7% of total revenue. however, judging from the revenue growth rate in the first half of the year, the increase in advertising spending does not seem to have achieved the desired effect.

after the release of its financial report, many brokerages lowered li ning's target price.

china merchants securitiesthe research report released said that li ning's relatively stable outlook for the second half of the year is consistent with the bank's and the market's expectations, which is believed to be mainly due to the management's prudence and active risk control, including inventory levels below 4 months, which is at a healthy level; channel optimization has brought about increased online contribution and improved profit margins; and the increase in the proportion of running shoes has driven a significant increase in overall retail sales.

china merchants securities pointed out that considering that the stock price is currently at a 10-year low, it believes that the risk-return has become better and maintains an "overweight" rating, with the target price reduced from hk$25.6 to hk$20.

cicc released a research report saying that li ning's profit in the first half of the year fell 8% year-on-year, but it was still higher than expected. thanks to the increase in gross profit margin and effective cost control, the company's dividend payout ratio in the first half of the year was 50%, higher than 45% in the same period last year. therefore, cicc maintains its earnings per share forecast for li ning this year and next year, which are rmb 1.25 and rmb 1.43 respectively, and maintains its "outperform the industry" rating. however, due to the decline in the average valuation of the industry, the target price of li ning was lowered by 34% to hk$16.79.

huaxing securities released a research report saying that considering the recent pressure on industry valuations and the unclear long-term growth prospects of li ning, it gave li ning a 2025 p/e of 14 times (previously 17 times), lowered the target price by 27% to hk$19.30, and maintained a "buy" rating.

citic securitiesaccording to the research report released, we expect that under the background of overall revenue growth under pressure in the second half of the year, the company is expected to achieve the full-year profit margin guidance with the help of strict discount control and cost optimization. in the long run, the company continues to maintain its core advantages in product innovation and iteration, and its product strength is in the first echelon of the industry, which is expected to help li ning cross the macro and industry cycles from a medium- to long-term perspective. we think that the current valuation has entered a gradual allocation range for long-term funds. referring to nike and the company's historical valuation levels, the company is given a 15x pe in 2024, corresponding to a target price of hk$19, and maintains a "buy" rating.