BOCOM International released a research report stating that Li Ning (02331) recorded a 2.3% year-on-year increase in revenue in the first half of the year. The overall gross margin increased to 50.4%. Net income decreased by 8.0% year-on-year, corresponding to a net margin of 13.6%. Li Ning distributed a mid-term dividend of RMB 37.75 per share, with a dividend payout ratio of 50%. The increase in customer traffic and expense ratio offset part of the increase in gross profit margin.
The bank pointed out that the company has improved the sales efficiency of high-level markets, promoted the improvement of direct-operated store business, and upgraded and constructed ninth-generation stores. The number of stores has exceeded 450, a 96% increase compared to the end of 2023. At the same time, the company is accelerating the development of emerging market channels and plans to open more than 100 new stores.
The bank continued to point out that due to the continuous pressure on customer traffic, the space for improvement in discount rates in the second half of the year is limited, and the trend of improvement in gross margin may slow down. In addition, the expense ratio in the second half of the year is usually higher than that in the first half of the year. The management has lowered its performance guidance, adjusting the annual revenue growth rate from mid-single digits to low-single digits, and maintaining a low double-digit net margin. Based on a 2025 PE ratio of 11.0 times (originally based on the average PE ratio of 13.4 times from 2024-25), the bank has lowered the target price from HKD 21 to HKD 14.89 and maintained a neutral rating.
