Golden Finance News | CICC International issued research reports stating that Li Ning (02331) had slightly better retail revenue in the third quarter of 2024 than market expectations. The growth in e-commerce channels is more stable, reaching mid-single digits. The sales performance of functional products outperformed that of fashion products (the 'China Li Ning' series faced greater pressure), while sales growth in outlets and non-outlet channels both slowed down. There is pressure on retail discounts and inventory.

The company has maintained its guidance for the 2024 fiscal year (single-digit sales growth and low double-digit net income margin), but the bank is more cautious, forecasting only 2% sales growth and an 11% net income margin. Although management emphasized that retail sales turned positive in October, to achieve the single-digit growth target, sales growth in the fourth quarter needs to exceed 10%, but the bank is more conservative (forecasting 7%). Performance during Singles' Day sales period is also crucial. The bank recognizes the company's determination in cost control, but remains cautious about operating profit margins, mainly due to the following reasons: 1) Deeper retail discounts are needed to achieve the year-end inventory-to-sales ratio target, 2) Unfavorable channel restructuring, 3) Higher-than-expected negative operating leverage effect, and 4) Relatively fixed operating expenses, including depreciation expenses for newly added factories and offices.

The bank maintains a 'buy' rating and raises the target price to HK$19.58 (previously: HK$16.18), based on a 13x PE ratio for the 2025 fiscal year forecast (previously 12x PE ratio for the 2024 fiscal year). The current price valuation is at 11x and a 4% dividend yield, which is quite attractive. With improved market sentiment and future recovery, the bank remains bullish on the company in the long term.