The company focuses on the “single brand, multiple categories, multiple channels” strategy and develops rapidly with the “national trend”. In recent years, the company has maintained a single-brand strategy, continuing to focus on the five core categories of running, basketball, badminton, fitness and sports life, and developing products with both sports expertise and fashion design. In terms of channels, the company continues to optimize the offline channel layout, develop direct and wholesale channels collaboratively, and successively launched brand flagship stores, Li Ning 1990, China Li Ning, basketball home stores, and Li Ning YOUNG stores to meet the needs of the offline customer base. At the same time, the company takes into account online channel development and continues to expand the development potential of online channels such as Douyin, Tmall, and Jingdong.

The company focuses on developing innovative capabilities, leading the industry with product and technological innovation. The company is a leading national sportswear brand, and its product design and R&D capabilities are at the forefront of the industry all year round. The company has been focusing on R&D investment for a long time, and the R&D rate from 2018 to 2024H1 remains around 2.2%. Continued investment in R&D drives the company's product strength and brand strength. Take shoes as an example. Since the brand's first basketball shoe, the Free Jumper, was equipped with a “B+C” outsole in 2004, the company has continuously innovated various types of shoe outsole technology, from cushioning structures and cushioning materials to extreme zero-quantity technology. The brand has successively launched “bows”, “clouds”, and “?” Core sports shoe technology such as “” endorses the company's product strength and strengthens the brand image of both professionalism and fashion.

E-commerce has developed rapidly in recent years, and the proportion of direct sales in offline channels has quickly recovered. According to financial reports, benefiting from the rise of e-commerce platforms, the company's online channel revenue has developed rapidly in recent years. 24H1's e-commerce channel revenue increased 5.4 pct to 27.9% compared to 2019, which is a new driver of revenue growth. Furthermore, after the pandemic, the repair of offline consumption scenarios and the development of the company's direct management system, the direct channel revenue share increased to 24.4%, close to the 2019 level. As the company develops a direct management system, the share of direct management is expected to increase further; the company's share of overseas business has remained stable for the past 5 years, but according to China Service Industry has begun preparations for new joint ventures to develop overseas markets for overseas companies, It is expected to promote the globalized development of the brand.

Profit forecast and rating: As a leading sportswear company in China, Li Ning focuses on the “single brand, multiple categories, and multi-channel” development plan, continuously iterates on the company's core shoes/apparel technology through R&D investment, and continues fashion design. The products take into account professionalism and fashion for a long time, continue to boost brand power, build competitive barriers, and positive channel adjustment and innovation capabilities are expected to build the company's long-term growth driver. We estimate that the company's net profit for 2024-2026 will be 3.126 billion yuan/3.445 billion/ 3.876 billion yuan, respectively. We chose Anta Sports and Bosideng, which are in the same sportswear industry as comparable companies. The average PE in 2024 was 14.1X, and Li Ning's corresponding PE was 12.0X in 2024. Considering that the company's brand position, product development capabilities and marketing capabilities on the sportswear circuit are superior, the first coverage gave it a “buy” rating.

Risk warning. The recovery in offline consumption fell short of expectations; channel adjustments fell short of expectations; competitive pressure on the industry increased.