Summary of Li Ning Co. (2331.HK) Conference Call Company Overview - Company: Li Ning Co. (2331.HK) - Market Cap: HK5.0 billion - Enterprise Value: HK3.0 billion - Industry: Greater China Retail Key Points from the Conference Call 1. 1Q25 Performance - Retail sales growth was reported at +LSD% year-over-year, aligning with expectations but weaker than competitors like Anta (+HSD%) and Fila (+HSD%) [1][2] - The performance in March and April showed a decline, indicating uncertainty in demand recovery [1][2] 2. Full Year Guidance - The company maintained its guidance for flat revenue growth and a net profit margin (NPM) at high single digits (HSD%) [2][17] - Management noted that the NPM decline is anticipated due to stable gross profit margin (GPM) outlook, increased advertising and promotion (A&P) expenses, and rising R&D costs [2][22] 3. Monthly Sales Trajectory - Sales were satisfactory in January and February but decelerated in March, with April showing persistent weakness due to unfavorable weather impacting spring collections [2][17] - Retail sales by channel showed mixed results: offline retail was down, while e-commerce grew by low teens percentage [18] 4. Discount and Inventory Management - Discounts improved year-over-year in 1Q25 but narrowed in March due to softening demand [2][18] - Inventory levels were controlled at approximately 5 times sales, with expectations to reach a healthier turnover of 4-5 times by year-end [18][22] 5. Category Performance - Running category saw over 20% year-over-year growth, while basketball and lifestyle categories experienced double-digit declines [2][18] - Footwear led growth with +HSD% year-over-year, while apparel saw a slight decline [18] 6. Store Network and POS - Total points of sale (POS) in China decreased by 29 in Q1, with expectations for a net closure of 10-20 direct-operated stores and an increase of 30-40 wholesale stores [18][22] 7. Marketing and A&P Strategy - A&P expenses are expected to increase by low double digits in 2025, with significant marketing planned for the second half of the year [22] - The company plans to launch various marketing activities, including sponsorships for marathons and basketball events [22] 8. Economic and Strategic Considerations - The company does not foresee significant direct impacts from tariffs due to minimal U.S. business, but indirect effects from economic factors are acknowledged [20] - Management's strategy remains focused on enhancing brand power through increased investment in professional resources and tailored products for specific consumer segments [21][22] 9. Financial Projections - Revenue forecasts for 2025-2027 have been revised down by 4-7% due to the current market conditions [8][14] - New 12-month price target set at HK14.8, based on a 12x 2026E P/E ratio [14] 10. Market Performance - The stock has underperformed relative to the Hang Seng China Enterprises Index, with a 12-month absolute return of -28.9% [10][11] Conclusion Li Ning Co. is navigating a challenging retail environment with mixed performance across categories and channels. The company is maintaining a cautious outlook for the remainder of the year, focusing on inventory management, marketing strategies, and adapting to economic conditions.
Li Ning Co. (2331.HK)_ 1Q25 in-line yet Mar-Apr weaker; 25 guide reiterated with several margin headwinds; Neutral
2025-05-06 02:29