Key points of investment
The company released 2024Q1 business data: 1) Li Ning (excluding young): 24Q1 omni-channel retail sales increased by low number of units, same-store sales declined year over year. The turnover performance was better than that of the same store, mainly due to differences in statistical caliber. The omni-channel traffic statistics include the flow contribution of newly opened high-efficiency stores during the 23Q1-24Q1 period. As of the end of 24Q1, Li Ning (excluding Young) stores were 6214, a net increase of 8 stores compared to the end of 23Q1. 2) Li Ning Young: 24Q1 omni-channel traffic increased by single digits year-on-year (due to the high 23Q1 base). As of the end of 24Q1, Li Ning Young stores were 1405, a net increase of 152 compared to the end of 23Q1.
The year-on-year increase in omni-channel traffic was low in number of units. Among them, e-commerce sales performed better than offline, and direct management performed better than wholesale. 24Q1 Li Ning (excluding young) omni-channel retail sales increased by a low number of units year over year. Among them, offline/e-commerce turnover fell to a low level of 20-30%. E-commerce traffic was significantly better than offline mainly due to base differences (23Q1, offline channels performed better than e-commerce after the release of the epidemic); in offline channels, direct-marketing/wholesale turnover increased year-on-year units/units of decline. Main reasons: ① Direct sales channels include 500+ Ole stores, recovering in a weak consumer environment Lower Ole stores performed better than regular price stores; ② wholesale channel customers The flow was under pressure due to the continuation of the previous trade in goods.
Overall same-store sales declined year-on-year. Among them, e-commerce grew faster, wholesale same-store declined more, and the number of stores increased slightly year-on-year. Overall same-store sales declined in the number of units in 24Q1. Among them, e-commerce increased 20-30% year over year, and offline direct/wholesale declined in the lower units/ 10-20% year-on-year period, respectively. Online same-store sales achieved relatively rapid growth, mainly due to the low base over the same period and the rapid growth of new platforms. We estimate that the 24Q1 delivery/Douyin/JDong/Tmall turnover ratio increased 100% +/ 20% +/ double digits/high number of units over the same period last year. Wholesale same-store sales have declined a lot. We judge that the main reason is that wholesalers traded goods in '23 and still had a certain impact on customer flow. As of the end of 24Q1, there were 6,214 Li Ning brand stores (1,499 direct sales & 4715 wholesale stores), compared to +8 stores (direct management+49 & franchise-41) at the end of 23Q1.
Stock sales ratios and discounts both improved year over year. 1) In terms of inventory, 24Q1 inventory sales were around the fourth month, improving from 4-4.5 months in 23Q1. The storage structure was flat year on year, accounting for nearly 90% of new products within 6 months, and overall inventory was at a healthy level; 2) In terms of discounts, 24Q1 online and offline discounts improved by a lower single digit compared to the same period last year, and the overall sales quality was steadily improving.
Profit forecast and investment rating: The company is a leading domestic sportswear company. The performance was pressured by inventory pressure and trading in '23. Along with the timely rectification of the trade issue, there was a slight increase in turnover and year-on-year improvements in inventory and discounts since 24Q1, and the overall quality of business has improved. Looking at the whole year, due to the high Q2 base, we expect Q2 operations to be under some pressure, and we expect the second half of the year to grow faster than the first half of the year. The company maintained the double-digit performance guidelines of keeping the number of units and profit margins low during 24 years of revenue growth. Considering the impact of the 23-year smuggling problem on terminal sales, we lowered the 24-25 net profit forecast value from 45.3/5.43 billion yuan to 33.78 billion yuan, and increased the 26-year forecast value of 4.02 billion yuan. The corresponding PE was 14/12/12X, maintaining the “buy” rating.
Risk warning: Weak consumption environment, terminal inventory risk.