Incident Overview
The company announced 2024Q1 operating data: Low unit growth in omnichannel traffic. Among them, offline/online units declined by 20-30%, while retail/wholesale showed medium unit increase/medium unit declines, respectively, that is, franchisees are still in the process of removing inventory.
Analytical judgment:
The store's recovery is weak. The high base put pressure on same-store recovery (1) Judging from the number of stores opened, the number of Li Ning (excluding Li Ning YOUNG) brand stores decreased by 26 to 6214 in 24Q1, up 0.13% year on year. Among them, retail/wholesale net increased 1/-27 from the beginning of the year to 1499/4715, and the number of stores increased by 3.38%/-0.86% year on year. The net number of Li Ning YOUNG brand stores decreased by 23 to 1,405 in 24Q1 compared to the beginning of the year, and the number of stores decreased by 1.61% year on year. (2) Overall, the number of units in the same store declined. Among them, the number of units decreased by 10-20% under the retail channel/wholesale channel. Direct management was still better than wholesale due to Ole's contribution, and the overall decline was mainly affected by the decline in customer flow. E-commerce grew at a low rate of 20-30% compared to the same period last year.
Discounts and inventory have improved. We estimate that both discounts and inventory have improved, but discounts are still far from normal.
Investment advice
According to our analysis, (1) We expect the number of units of revenue growth in 24: We expect direct sales of the main brand and net closing of stores. Only children's clothing and 1990 will maintain net sales, but it is expected that franchise delivery will improve, and e-commerce channels are expected to gradually recover in '24. On the product side, Wade 11 is expected to contribute revenue in the future after its release. (2) The net interest rate is expected to remain low in double digits in 24: the 24Q1 discount has improved; after 23 years of accruing impairment losses, there is significant profit elasticity in 24 years, and there is still room for improvement in non-net interest rates in the long run. (3) In the long run, children's clothing is expected to become a new growth point. In 1990, it is still in the cultivation period. According to the records of investors and exchangers quoted by Sina Finance, China's Li Ning has entered the channel adjustment stage and will focus on improving store efficiency in the future. The company will focus on building the main brand's professional sports attributes, with professional sports accounting for more than half in 23 years. Maintaining the previous profit forecast, the estimated operating income forecast for 24/25/26 is $292/325.4 billion, the net profit forecast for 24/25/26 is 35.7/4.23 billion/5.02 billion yuan, corresponding to the 24/25/26 EPS forecast of $1.38/1.63/1.94, and the closing price of HK$17.5 on April 23, 2024 corresponds to a PE of 11/10/9 times (1 HKD = RMB 0.92) to maintain the “buy” evaluation grade.
Risk warning
The risk of changes in fashion sports trends, the risk of worsening inventory backlog, increased risk of terminal discounts, a slowdown in e-commerce growth, and systemic risks.