In the current environment of strong market sentiment, Bocom International believes that once LI NING (02331) demonstrates a clear trend of brand strength recovery and improved sales turnover, its stock price is poised for significant upward momentum. As one of the few domestic sportswear brands with a convincing earnings turnaround narrative, the firm considers LI NING's stock to possess higher elasticity compared to its peers. It maintains a "Buy" rating on LI NING and raises the target price to HK$23.4, equivalent to 18 times projected 2026 price-to-earnings ratio. Key viewpoints from Bocom International are outlined below.
Management has indicated that full-year 2025 total channel sell-through for core apparel, excluding children's wear and professional channels, is expected to be flat year-on-year. Driven by rapid revenue growth in the children's wear and professional segments, management forecasts a slight year-on-year increase in total 2025 revenue, outperforming the company's initial guidance of "flat full-year revenue." Furthermore, benefiting from government subsidies exceeding expectations, management anticipates the 2025 net profit margin will likely reach the upper end of the "high-single-digit" full-year guidance. Based on this, the firm projects LI NING's full-year 2025 revenue to grow 2.5% year-on-year to RMB 29.4 billion, with attributable net profit reaching RMB 2.75 billion and an attributable net profit margin of 9.4%. Excluding one-off impairment charges from the first half, core attributable net profit for 2025 is estimated at RMB 2.93 billion, with a core attributable net profit margin of 10.0%.
Notably, LI NING was one of the few sportswear brands that showed a sequential improvement in sales turnover during December. This improvement is likely attributable to the launch of the Glory Gold Label product series late last year. The firm cautions that short-term turnover figures are heavily influenced by the shifting timing of the New Year and Lunar New Year holidays and thus may not be representative. With the approaching Milan-Cortina Winter Olympics (opening February 6th), LI NING's brand visibility is expected to increase consistently, providing positive support for future sales trend improvements.
Looking ahead to 2026, management has indicated a need to moderately lower growth expectations for the running and badminton categories, while anticipating improved revenue performance from the currently weaker basketball and sports lifestyle categories. The firm forecasts that LI NING's running category revenue will maintain a growth trajectory over the next two years, contributing to an acceleration in the company's overall revenue growth. Management has stated that the company will continue to increase investment in marketing expenses throughout 2026, with the marketing expense ratio expected to rise year-on-year. Centered on the "Olympics + Technology" strategy, LI NING will focus intensely on brand rejuvenation and enhancing brand power over the next three years, laying a solid foundation for medium to long-term revenue growth.
Investment risks include a potential slowdown in industry demand and fiercer-than-expected competition among domestic brands.
