Revenue from 23 billion yuan increased 7%, net profit to mother of 3.19 billion yuan decreased by 22%. The company released 23 year results, with annual revenue of 27.6 billion yuan up 7%, of which H1/H2 revenue was 14.02 billion (+13%) and 13.58 billion (+1%), respectively; net profit from 23 to mother decreased 22% from 3.19 billion yuan, and net profit from H1/H2 was 2.12 billion (-3%) and 1.07 billion (-43%), respectively; net profit after 23 years of adjustment was 3.05 billion yuan.

The company paid a final dividend of RMB 18.54 cents, combined with an interim dividend of RMB 54.74 cents for the whole year, with a dividend payout ratio of 45% for the whole year.

By revenue channel, direct revenue of 6.91 billion yuan increased 30% in 23 years, wholesale revenue of 12.63 billion increased 0.6%, and e-commerce of 7.53 billion yuan increased 0.9%;

By category, footwear revenue of 13.39 billion yuan decreased by 0.7%, accounting for 49% of total revenue; clothing revenue of 12.41 billion yuan increased 16%, accounting for 45% of total revenue; and revenue of accessories of 1.8 billion yuan increased 11%.

By the end of the year, the company's inventory of 2.49 billion yuan had an increase of 3%. The omni-channel inventory ratio was 3.6 months, and the number of units in channel inventory decreased year-on-year. The average inventory turnover of 63 days increased by 5 days. New product inventory within 6 months accounted for 80%, and the overall storage age structure maintained a healthy level.

The gross profit margin of 48.4% remained flat year on year in '23, the net profit margin of 11.5% was the same with a 4.2pct decrease of 48.4% year on year, and the net profit margin of 11.5% was the same decrease of 4.2pct; improved direct store discounts led to a 0.2 pct increase in gross margin, channel structure optimization and other factors led to an increase of 0.6 pct, but e-commerce gross margin decreased 0.8 pct due to increased competition.

The annual sales and distribution expenses rate increased by 32.9% and 4.6pct, mainly due to the increase in direct operating income due to rent related to direct management, sales staff wages and bonuses, etc., which led to an increase in amortization of store rents and equipment due to high-level market layout and adjustments, depreciation of some loss-making stores, and an increase in advertising and sponsorship expenses. Administrative expenses accounted for 4.6% of total revenue in '23, an increase of 0.3 pct.

23Q4 offline direct sales increased at the same low level by 50-60%. Judging from the operating data, 23Q4 Li Ning (excluding Li Ning YOUNG, same below) saw the same increase in sales volume of 20%-30% and the high offline segment, including direct sales 50%-60% lower segment, wholesale 10%-20% high segment, and e-commerce increased the same number of units; 23 Overall retail sales increased 10% to 20% lower level throughout the year, retail discounts improved slightly, and retail discounts improved slightly.

In 23Q4, Li Ning's same store grew by 10-20%. Among them, direct sales also increased by 30-40%, while wholesale and e-commerce increased the number of units at the same time.

The total number of units in the company's total store area has increased, and the average monthly store efficiency has increased by a high number of units; the high-level market layout has basically been completed, related turnover contributions have steadily increased, and the entry rate of core businesses has increased to nearly 90%.

By the end of 2023, Li Ning (excluding Li Ning YOUNG) had a total of 6240 stores, a year-on-year decrease of 55, including a net increase of 68 direct-run stores and a net decrease of 123; Li Ning children's clothing had a total of 1,428 stores, an increase of 120 over the previous year.

Deeply involved in functional technology, professional sports products drive growth. Product efficiency continues to improve. By category, the overall market increased by 12%. Among them, the running category increased by 40% (23% of the total), fitness increased 25%, basketball remained the same (27% of the total), and sports life remained the same year over year.

The running shoe matrix is becoming more mature. In 23 years, over 12 million IP pairs of professional shoes were sold, including Ultralight, Red Rabbit, and Flying Electric sold more than 9 million pairs throughout the year.

Product operation efficiency continued to improve. In 23, the company's product breadth increased the number of units and the number of units in depth. The 3-month discount rate for new products was about 80%, and the 6-month sell-out rate reached a high level of 70-80%.

Update profit forecasts and maintain “buy” ratings

The company focuses on the “single brand, multi-category, multi-channel” strategy, continuously strengthens the brand's professional sports product layout, and further enhances retail operation capabilities and channel efficiency. Considering e-commerce channel pressure and wholesale operation improvements, we have updated and adjusted profit forecasts. We estimate that the company's revenue for 24-26 will be 293/31/35 billion (32/37.2 billion, respectively), net profit to mother will be 34/39/4.4 billion yuan (44.53 billion yuan 24-25 years ago, respectively), and EPS will be 1.3/1.5/1.7 yuan/share (24-25 years ago values were 1.7/2 yuan/share, respectively). The corresponding PE is 14/13/11x, respectively.

Risk warning: Fluctuations in raw material and labor prices, steady increases in environmental requirements affect the company's gross profit; sales of new products fall short of expectations; channel layout and market penetration fall short of expectations; intensification of the industry competition pattern, etc.