The latest statistics really show the power of the cotton incident:

And the market's pursuit of Li Ning Co. Ltd. (02331.HK) and 02020.HK is by no means a short-term market catalyzed by unexpected events, but a long-term phenomenon in an absolute sense: in recent years, apart from technology stocks, there is definitely a place for Anta and Li Ning Co. Ltd. on the list of companies that attract the most attention from investors in the Hong Kong stock market.

Li Ning Co. Ltd. 's share price has risen since the beginning of 2016, from about HK $3.88 per share (formerly reinstated) to more than HK $70 today, up as much as 17 times, with a market capitalization of more than $170 billion.

Li Ning Co. Ltd. can be called a "time-honored brand" and "primary flow" in the sports shoes and clothing industry. In the past, most of the audiences were middle-aged people who were contemporary with Li Ning Co. Ltd., but now they can reap the popularity of a large number of young people, and the brand is rejuvenated.

What did Li Ning Co. Ltd. do right, directly across the age gap, in the post-00, post-05 era coruscated a brilliant second spring?

I. 2008-2011: the Golden Age of the Garment Industry

Since the 2008 Beijing Olympic Games, the development of Li Ning Co. Ltd. can be divided into three stages: 2008-2011, 2012-2014, 2015 to the present.

Before 2011, is the golden era of the development of the entire clothing industry, the major clothing companies crazy horse enclosure, the scale of revenue continues to rise.

Take Li Ning Co. Ltd., ANTA Sports Products, Samar clothing, Meibang clothing and other five companies as an example, Li Ning Co. Ltd. 's revenue rose from 4.349 billion in 2007 to 9.479 billion in 2010, and fell back to 8.929 billion in 2011, with a compound growth rate of 19.7%, lower than ANTA Sports Products's 29.33%.

The performance of fashion clothing enterprises represented by Samar clothing and Meibang clothing is also very eye-catching, with revenue rising from 1.82 billion and 3.16 billion to 7.76 billion and 9.95 billion respectively, with a compound growth rate of 43.66% and 33.23%.

The revenue of clothing enterprises mainly depends on the total number of stores and average store efficiency, which determines the channel scale and profit efficiency of enterprises.

Li Ning Co. Ltd. 's total number of stores rose from 5233 in 2007 to 8255 in 2011, with a compound growth rate of 12.07%, of which more than 1000 stores were added each year from 2007 to 2009.

In the same period, the average store efficiency rose from 831000 yuan to 1.1975 million yuan, and then adjusted back to 1.0816 million yuan, the growth rate is much lower than the total number of stores.

This shows that the revenue growth in this period mainly comes from the simple and extensive crazy store expansion model, and the average store efficiency basically does not keep up with the revenue growth rate.

However, Li Ning Co. Ltd. 's management could not resist at this time. Zhang Zhiyong, the professional manager of the then CEO, thought that the time was ripe for Li Ning Co. Ltd. to enter the world and tried to reshape the Li Ning Co. Ltd. brand.

In 2010, under the leadership of Zhang Zhiyong, the Li Ning Co. Ltd. brand changed its LOGO, and the slogan changed from "anything is possible" to "Make The Change".

II. 2012-2014: the quagmire of Li Ning Co. Ltd.

In 2012, the carnival ended abruptly.

The overheated clothing industry has entered a cold winter, and the market supply is far greater than demand, resulting in a backlog of out-of-season clothing for both manufacturers and dealers, which further leads to poor sales, and there is a trend of closing stores for enterprises and dealers whose previous stalls are too large. Dealers who have not fallen down are very cautious when ordering.

This period is called the "inventory crisis".

Looking at most A-share clothing listed companies, the inventory backlog of American Garment and Red Bean shares is relatively serious, with inventories reaching 2.006 billion and 4.259 billion respectively in 2012, accounting for 28.63 per cent and 62.35 per cent respectively.

Li Ning Co. Ltd., on the other hand, fared relatively well, with inventories peaking at 1.133 billion in 2011, rising to 15.46 per cent.

But the actual crisis is actually far more serious than the paper figures. Taking into account the distribution model, most of the backlog of inventory is mainly in the channel, and is not reflected in the company's statements, that is, the industry commonly known as channel stuffing.

At that time, clothing brands no longer compete with the number of stores and high growth, but the ability to remove inventory: whoever is the first to clean up inventory to a reasonable level and revitalize the channel will be the first to recover from the crisis.

The most simple and rude method is for the enterprise to push the inventory cheaply to the downstream sales channel, but this leads to the increase of channel inventory, the channel digestion capacity is not improved, there is the suspicion of killing the goose that lays golden eggs, and the problem is only covered up and not solved. In the long run, the disadvantages to the company and the brand far outweigh the benefits.

Brands such as Senma clothing choose to digest offline inventory through e-commerce platforms, cooperate with brands such as Handu Yishi, participate in Taobao "cost-effective" and other activities, and concentrate on cleaning up inventory in a short period of time.

Throughout the "avatar" of various clothing companies, Li Ning Co. Ltd. 's move was the most radical, and other enterprises shook their heads one after another, saying that they could not learn.

(1) introducing private placement, Jin Zhenjun to the stage

In January 2012, Li Ning Co. Ltd. issued 750 million yuan of convertible bonds to TPG Asia and GIC (GIC), of which TPG subscribed for 561 million yuan.

According to public information, TPG was considered to be the largest private equity firm in the world at that time, investing in Lesser Fullness of Grain Finance, China International Capital Corporation, Lenovo, mobike and other companies.

Jin Zhenjun, a TPG partner who has helped Guanghui Motor and Daphne successfully transform, served as executive vice chairman and began to lead the company reform during this period.

Jin Zhenjun's style is so fierce that after taking office, he laid off a large number of management and recruited a new management team, covering important positions in supply chain, product, design, marketing and other important positions. and has the experience of working in Nike Inc, Dell, Johnson & Johnson and other foreign companies.

After the management rectification was completed, Jin Zhenjun began to make a tough move on the channel.

(II) Channel Revival Plan

Jin Zhenjun believes that improving the inventory portfolio of the channel and restoring the profitability of the channel is the primary task of Li Ning Co. Ltd. 's revival.

In order to quickly cut the chaos to solve the problem of channel inventory backlog, Jin Zhenjun gave several doses of strong medicine.

First of all, the company directly paid to buy back the out-of-season clothing from the sales channel, and part of the money was deducted by accounts receivable, which directly led to the company's provision for bad debts of 933 million yuan and inventory decline provision of about 400 million yuan, totaling 1.333 billion yuan.

Second, the company reviewed the profitability of dealers and closed a large number of inefficient stores. The number of stores fell to 6434 at the end of 2012, and more than 1/5 stores were closed.

At the same time, in order to clean up the old inventory, the company has increased the number of brand factory stores, discount stores and other clearance channels, from 269 and 358 in 2011 to 277 and 446 respectively.

Moreover, in order to improve operational efficiency and strengthen the ability to manage channels, the company continues to increase the number of direct stores, from 631 in 2012 to 1611 in 2016, accounting for 25.02% from 9.81%.

Finally, like other clothing companies, Li Ning Co. Ltd. began to transform from wholesale to retail. The specific measures are as follows:

1. Under the wholesale mode, an exhibition will be held every quarter, and the dealers will freely choose and order the products that appear on the market after 6 months. After the reform, the company sets up A+ best-selling products and specific SKU plans according to market analysis, and monitors the sales of products in real time and can replenish them in time to reduce the inventory risk of dealers.

According to the 2014 report, A+ products accounted for more than 50% of futures orders, and the sales rate of A+ and other products increased by an average of 5 percentage points in 2013, indicating that the company's sensitivity to the market has improved to a certain extent.

2. Since October 2012, in order to keenly capture the market trend, Li Ning Co. Ltd. has made great efforts to improve the ability of consumer data analysis, and launched a rapid response product line to meet the changes in customer demand.

After a series of measures, the company has changed from the traditional mode which can only order futures at the trade fair to the retail-led ordering mode with the characteristics of "inertia order + best-selling SKU replenishment + fast reverse products".

(3) Brand rectification, focusing on core categories

From 2009 to 2012, Li Ning Co. Ltd. 's brands were complicated, and Li Ning Co. Ltd. himself hatched "post-90s Li Ning Co. Ltd.". Its brands include Hong Shuangxi and Letu, which focus on table tennis, and badminton's Kaisheng, Aigao and Xinzuo.

Until 2012, Li Ning was the main source of income, accounting for 88 per cent of revenue, 5.926 billion that year, 542 million for Hong Shuangxi, and only 8 per cent for Letu and other brands.

Since 2012, Li Ning Co. Ltd. has redefined his strategic focus, focusing on the main brands and the five core sports categories: basketball, running, badminton, training and sports life.

First of all, due to the poor operation effect of the two brands, Li Ning Co. Ltd. decided to completely suspend all business of the brand, terminate the cooperation with the brand side, cut off the marketing support for Letu, close a large number of Letu self-operated loss stores, and set aside 128 million yuan for franchise impairment.

Subsequently, in terms of products, focus on the above five core sports categories, targeted, hierarchical launch of layout products, details will be described below.

In terms of marketing resources, the previous "post-90s Li Ning Co. Ltd." invited Lin Zhiling to be a contemporary speaker in order to highlight the rejuvenation of the post-90s generation, which for the first time violated Li Ning Co. Ltd. 's tradition of inviting only athletes to speak for the time being.

After Li Ning Co. Ltd. returned to the mountain in 2012, he also said that it was a failure to ask Lin Zhiling to be an endorsement, and began to adjust the input of marketing resources.

In basketball, for example, Li Ning Co. Ltd. became the exclusive sponsor of the CBA new season for the five seasons from 2012 to 2017, relying on CBA's platform and exposure for large-scale publicity.

Before 2012, the company signed sponsorship with NBA rookie Evan Turner and many other players, with low fame and limited promotion of the Li Ning Co. Ltd. brand, which has a lot to do with the monopoly of top NBA player resources by top companies such as Nike Inc and Adidas.

Since 2012, Li Ning has signed with Heat star Dwyane Wade and launched a new high-end brand, Wade Road, with seven generations of sneakers priced at around 90-1300 yuan.

I don't know what Li Ning Co. Ltd. offered moved Wade, but at least one thing is certain, that Li Ning Co. Ltd. gave so much that it became an important reason for Li Ning Co. Ltd. to use it as an important reason for the rise in distribution costs in his 2012 and 2013 newspapers.

To sum up, Jin Zhenjun almost reshaped Li Ning Co. Ltd. from head to toe, and the reform measures were quite radical.

So how does it work?

(4) A total loss of 3.128 billion over the past three years

At least from the perspective of revenue and return net profit, most people will come to a conclusion that Jin Zhenjun is out of play.

The following figure shows the revenue and net profit from 2010 to 2015:

Li Ning Co. Ltd. 's revenue was the first to decline in 2011, falling to 6.739 billion and 5.824 billion in 2012 and 2013, down 24.52 per cent and 13.57 per cent from a year earlier, before resuming growth to 6.728 billion in 2014.

Li Ning Co. Ltd., Xtep International and 361degree all returned to growth from 2014 to 2015, but Li Ning Co. Ltd. 's growth rate did not stand out compared with their peers.

ANTA Sports Products only fell in 2012, but the decline was not high, and revenue surpassed Li Ning Co. Ltd. for the first time, returned to growth after 2014 and quickly shook off Li Ning Co. Ltd..

And Li Ning Co. Ltd. 's return net profit can simply be described as miserable.

In 2011, net profit first plummeted to 386 million, down 65.19% from a year earlier. It suffered a huge loss of 1.955 billion in 2012 due to large asset impairment and one-time repurchase inventory, and continued to lose 392 million and 781 million in 2013 and 2014, with a total loss of 3.128 billion in three years.

It barely turned a profit in 2015, at 14 million, the worst performance of the four companies.

The other three companies also suffered varying degrees of decline in 2012-2013, of which 361 degrees plunged by 70.13% year-on-year in 2013, but still made a profit of 211 million.

In 2014, the net profits of all three companies rebounded, but Li Ning Co. Ltd. 's losses increased rather than decreased.

If Fengyunjun were a shareholder of Li Ning Co. Ltd. at that time, he would also be extremely dissatisfied with the effect of Jin Zhenjun's reform.

After three consecutive years of net profit losses and a continued plunge in share prices, management has been criticized by shareholders, and Jin Zhenjun stepped down early in 2014.

III. Living to death: Li Ning Co. Ltd. 's Post-2015 era

After Jin Zhenjun left, Li Ning Co. Ltd. decided to go into battle in person, return to the management position, and dominate Li Ning Co. Ltd. 's next development with the prestige of the founder.

Starting from 2015, Li Ning Co. Ltd. seems to have found his backbone and really began to recover.

However, after four years of managing the company, Li Ning Co. Ltd. stuck to the idea of professional managers to run the company and again hired Takeshi Takasaka, who was the global executive director of Uniqlo and then the COO of China and the CEO of South Korea, as co-chief executive in 2019.

According to public information, the division of labor between the two is clear: Li Ning Co. Ltd. is in charge of the group's personnel, finance and strategic direction, while Osaka Takeshi is mainly responsible for the group's operations.

So how is Li Ning Co. Ltd. 's performance these days?

The company's operating income increased year by year from 7.089 billion in 2015 to 14.457 billion in 2020, with a compound growth rate of 15.32%.

The net profit of home ownership rose rapidly from 14 million to 1.698 billion, especially in 2019, with a year-on-year increase of 109.59% and a compound growth rate of about 1.6 times.

What on earth has happened to Li Ning Co. Ltd. during this period?

Fengyunjun mainly studies from two aspects: product and channel.

(1) improve the strength of the brand and set the tide in Chengguo.

From the product classification, in 2019 and 2020, clothing income accounted for about 51% of the total income, footwear accounted for about 43%, is the main source of income.

Li Ning Co. Ltd. 's development idea at this stage is "single brand, multi-category, multi-channel", focusing on brand strength and product strength.

Single brand refers to the concentration of resources to develop Li Ning Co. Ltd. 's brand matrix and start the brand of Li Ning Co. Ltd.. The new brand basically relies on Li Ning Co. Ltd. 's development, unlike the previous Letu and Hongshuangxi independent development model.

Moreover, Li Ning Co. Ltd. has firmly established the sports fashion market by creating his own brand.

During this period, Li Ning Co. Ltd. 's main sports fashion brands are "Spring Standard", "LNG", "China Li Ning Co. Ltd." and "BADFIVE".

Around 2015, Li Ning Co. Ltd. successively launched two sub-brands, "Spring label" and "LNG".

"Spring label" is a fast fashion brand with blue as its main tone, and its channels are mainly shopping malls in second-and third-tier cities.

On the other hand, "LNG" is aimed at urban business white-collar workers and is mainly sold in Chaoda and front-line core business areas, with Korean design team leading the design and development.

While the company took advantage of the opportunity of the rise of the national tide in recent years to launch the national trend brand "China Li Ning Co. Ltd.", and caught fire in New York Fashion week in 2018, thus cutting into the incremental market of sports fashion, to a certain extent, Li Ning Co. Ltd. gave consumers a more "rustic". The consumer age class is the image of middle-aged people.

By the end of 2019, the company had opened 120 "China Li Ning Co. Ltd." stores, and the number of stores was not released in the 2020 annual report, which should still be in the stage of offline channel expansion in the next few years.

Moreover, the company has successively signed Hua Chenyu and Xiao Zhan as product spokesmen, once again breaking the tradition that the company has always been endorsed by athletes, mainly because of the strong purchasing power of the fan economy.

Since 2017, Li Ning Co. Ltd. has also launched a series of "BADFIVE" street basketball shoes and clothes, deeply cultivated hip-hop culture, has a customer base of hip-hop fans, and holds street basketball and hip-hop competitions in several cities to attract fans' attention.

To sum up, Li Ning Co. Ltd. has made great efforts in sports and fashion and is known as the leader of this round of national tide. He has successfully expanded the customer base from the middle-aged to young people at the same time as Li Ning Co. Ltd., and his products can also stand firm in the middle-and high-end market.

(2) focus on 5 categories

Multi-category mainly refers to basketball, running, training, badminton and sports fashion, here mainly describes some of the company's iconic products.

In basketball, Li Ning Co. Ltd. mainly has four IP of "sonic", "commander-in-chief", "air raid" and "blitzkrieg". He continues to produce new sneakers around four IP, with prices between 400 yuan and 700 yuan, facing the mid-market.

At the same time, the Wade Road series has reached No. 8, with a price of up to 1699 yuan per pair, focusing on the high-end market.

In terms of running, many kinds of running shoes such as Feidian, Tianma and Jujun have been launched one after another, among which the newly launched Shadow has a hollow design in the midsole, and the price is also as high as 1699 yuan per pair, which is said to have strong damping performance.

Sports fashion refers to Wade's way, "BADFIVE" and other products, which will not be repeated here.

Therefore, Li Ning Co. Ltd. 's product power has been significantly improved, consumers are more willing to pay, and this will promote the development of Li Ning Co. Ltd. channel.

(3) the rapid growth of e-commerce channels

Finally, let's take a look at Li Ning Co. Ltd. 's channels.

In terms of revenue classification, the fastest growing is the e-commerce channel, which rose rapidly from only 330 million in 2014 to 4.048 billion in 2020, with a compound growth rate of 51.89 per cent.

Dealer revenue rose from 3.788 billion to 6.925 billion, a compound growth rate of 10.58 per cent.

The number of direct-run stores was 3.267 billion in 2020, down 9.74% from 2019, with a compound growth rate of only 5.21%, the slowest growth rate.

As a result, e-commerce's share of revenue rose from 4.9% in 2014 to 28% in 2020, surpassing the 22.6% of direct stores.

The share of dealers fell below 50% in 2017 and 47.9% in 2020, still the company's main source of revenue.

The rapid development of e-commerce is related to Li Ning Co. Ltd. 's great investment.

Since 2015, Li Ning Co. Ltd. has proposed to change from a sports equipment provider to a "Internet + sports life experience" provider, promoting the O2O strategy.

The main changes are as follows:

1. On the channel side, an integrated all-channel inventory system will be built since 2015 to realize the interconnection of online and offline channels.

2. At the end of the supply chain, best-selling products are replenished every week in 1500 stores across the country.

3. On the marketing side, realize the XIAOMI-like model of "online sales, offline experience or delivery", carry out store self-media operation, and launch live e-commerce in 2019.

Looking at offline channels, the number of distribution stores slowly rebounded from 4424 in 2014 to 6225 in 2019, while the number of direct stores fell to 1187 in 2020 after peaking at 1611 in 2016.

The explanation given by Li Ning Co. Ltd. is to pay attention to the fine management of direct stores and close some inefficient stores one after another.

In terms of average store efficiency, the reason given by Li Ning Co. Ltd. is tenable. The average efficiency of direct stores has rebounded from 159 million yuan per store at the bottom in 2016 to 275 million yuan per store in 2020. However, it is still an indisputable fact that the proportion of revenue from direct stores is declining.

The performance of dealers is relatively stable, showing signs of rising in recent years, reaching 121 million yuan per store in 2020.

In 2020, 479 inefficient and lossmaking distribution stores were closed, resulting in a decrease in the number of stores and an increase in average store efficiency.

Distribution expenditure rose from 2.969 billion in 2016 to 4.425 billion in 2020, with the expense rate declining slowly.

IV. Comparison of financial data

Next, we compare Li Ning Co. Ltd. with Anta, Nike Inc and Adidas to see how the company performs.

(1) the scale of revenue and return net profit is relatively minimum.

Due to the large revenue gap, Li Ning Co. Ltd. and Anta are not compared with Nike Inc and Adidas here.

After a trough of 5.824 billion in 2013, Li Ning Co. Ltd. 's revenue rose year by year to 14.457 billion in 2020, with a nine-year compound growth rate of just 5.5 per cent.

Anta overtook Li Ning Co. Ltd. in 2012 and then grew rapidly to 35.512 billion in 2020, far more than double the size of its former rivals, with a nine-year compound growth rate of 16.61 per cent. (we will launch Anta's research newspaper in the follow-up. Welcome to download Market capitalization Fengyun APP and get an exclusive research report as soon as possible.)

Nike Inc and Adidas were companies with hundreds of billions in revenue as early as 2011. Nike Inc exceeded 200 billion in revenue in 2015, rose to 258.385 billion in 2019, and grew at a compound growth rate of 6.51 per cent in 2011-2019.

Adidas's revenue in 2019 was 182.955 billion, with a nine-year compound growth rate of only 4.67%, lower than Li Ning Co. Ltd..

(note: since Nike Inc's 2020 fiscal year ranges from June 2020 to June 2021, 2020 is the data for the first three quarters.)

Li Ning Co. Ltd. 's return net profit is also the smallest, climbing out of the quagmire and turning losses into profits in 2015, rising to 1.698 billion in 2020, while ANTA Sports Products has risen to 5.162 billion in the same period.

Adidas reached 15.295 billion in 2019, but affected by the epidemic, it plummeted to 3.666 billion in 2020, falling behind ANTA Sports Products for the first time.

Benefiting from the strong recovery of the Chinese market, Nike Inc's net profit from homecoming soared to an all-time high of 29.122 billion.

(2) profitability is close to that of giants

Li Ning Co. Ltd. 's gross profit margin rose from 37.84% in 2012 to 49.07% in 2020, higher than Nike Inc's 44.44% in the same period, but lower than ANTA Sports Products and Adidas.

Generally speaking, the gross profit margin of the distribution model is lower than that of the direct operation model, but the direct operation model faces huge store leasing and labor costs.

The advantage of the direct operation model is that it has a strong ability to control the channel and can maximize profits, but if it can not do fine management, too much emphasis on the development of the direct operation model will greatly increase the management burden of the company.

Nike Inc derives most of his income from the distribution model, and his gross profit margin hovers around 44 per cent.

Mentioned earlier, Li Ning Co. Ltd. 's distribution channel income share showed a slow downward trend, e-commerce channel income rapid growth, its gross profit margin has a small pulling effect.

Anta's performance is the most exaggerated, rising to 58.15% in 2020 after the gross profit margin exceeded 50% in 2018, far ahead of comparable companies.

Looking through its annual report, all Anta's "FILA" stores adopt the direct operation model, with a gross profit margin of 70% in recent years and more than half of its revenue, which has greatly increased Anta's comprehensive gross profit margin.

The gross profit margin of the Anta brand is about 41.3% and 44.7% from 2019 to 2020, which is not outstanding in itself.

Looking at the performance of the net interest rate, Li Ning Co. Ltd. 's net interest rate trend is the same as the gross profit margin, rising to 11.75% in 2020, which is basically at the same level as the long-term net interest rate of Nike Inc and Adidas, although the business models of the three companies are slightly different. But profitability is still quite close.

(3) excellent cash cycle performance

Li Ning Co. Ltd. 's total assets rose from $7.329 billion in 2011 to $14.594 billion in 2020.

Taking the 2020 report as an example, the larger subjects in Li Ning Co. Ltd. 's balance sheet are as follows:

Li Ning Co. Ltd. has as much as 7.187 billion cash in his account, accounting for 49.25%, which is the largest subject; the scale of inventory is 1.346 billion, accounting for 9.22%, which is similar to ANTA Sports Products's statement.

The most amazing performance was Li Ning Co. Ltd. 's accounts receivable, which fell to 659 million from 1.44 billion in 2015, while the share of assets fell from 20.88 per cent to just 4.52 per cent.

Although the proportion of accounts receivable of Nike Inc and Adidas also declined, to 10.14% and 9.27% respectively at the end of 2020, the scale of accounts receivable did not decrease as much as Li Ning Co. Ltd..

Under the premise of the continuous expansion of the revenue scale, the scale of accounts receivable can continue to decrease, indicating that Li Ning Co. Ltd. 's credit policy is very strict and has a strong ability to control the channel.

After the company delivers the goods to the dealer, it confirms the accounts receivable, and the dealer generally requires payment within 90 days.

At the end of 2019 and 2020, more than 70% of accounts receivable were within 90 days of age, making them healthier.

Li Ning Co. Ltd. 's accounts receivable turnover rose sharply from 4.1 in 2013 to 21.47 in 2020, much higher than the other three companies.

ANTA Sports Products, Nike Inc and Adidas have been between 8 and 10 times for a long time, and their performance is very stable.

Li Ning Co. Ltd. 's inventory turnover rose from 3.51 in 2013 to 5.37 in 2020, also far better than the other three companies.

Both Nike Inc and Adidas showed a steady downward trend, about 3.26 and 3 times in 2019.

Finally, let's take a look at the company's cash cycle. The cash cycle of Li Ning Co. Ltd. and Anta shows the opposite trend. Li Ning Co. Ltd. dropped sharply from 96 days in 2014 to only 20 days in 2020. The occupation of funds for the completion of a round of purchase, deposit and sale is very low and the use of funds is excellent. Anta quickly rose to 95 days, which is relatively worse.

Li Ning Co. Ltd. 's operation ability is quite strong.

(4) pressure on unpaid debts

Li Ning Co. Ltd. 's asset-liability ratio gradually fell from 69.96% in 2012 to 30.7% in 2017, and then rebounded to 40.46% in 2020, the lowest among comparable companies.

The other three companies have also shown an upward trend in asset-liability ratios in recent years. Nike Inc and Adidas reached a higher level of nearly 70 per cent in 2020, while ANTA Sports Products rose rapidly from 24.71 per cent in 2017 to 50.21 per cent in 2020.

By 2020, Li Ning Co. Ltd. 's total liability was 5.904 billion, of which other payables and accrued expenses were the largest, reaching 2.5 billion, followed by accounts payable and notes of 1.227 billion.

Other payables and expenses payable mainly include refund liabilities, accrued sales and marketing expenses and sales rebates, all of which are operating liabilities.

Li Ning Co. Ltd. has no bank loans in the past four years, and the interest-bearing debt is only 1.05 billion of the lease debt, while the cash on the account is as much as 7 billion, which means the pressure of unpaid debt.

(5) the cash flow is good, but the dividend rate is not high

Net operating cash flow only returned to net inflows in 2015, then rose to a high of 3.503 billion in 2019 and fell back to 2.763 billion in 2020.

Since 2011, Li Ning Co. Ltd. has accumulated net operating cash flow of 9.456 billion yuan and created free cash flow of 5.828 billion yuan.

However, between 2012 and 2017, the company did not pay a penny dividend on the grounds of "retaining cash for the future development of the group".

From 2018 to 2020, the company paid dividends of 190 million, 354 million and 506 million respectively, creating a total return of 1.05 billion for shareholders.

The dividend rates in the last three years were 26.57%, 23.62% and 29.8%.

Postscript

Compared with the world giants, Li Ning Co. Ltd. 's size is still very weak and has even been far surpassed by his former rival Anta. How to catch up with the giants more quickly is still a difficult problem for Li Ning Co. Ltd. 's management.

Li Ning Co. Ltd. climbed out of the mud puddle after 2015, taking advantage of the rise of the "national tide" to re-enter the horizons of young people, and his performance has returned to growth, which is commendable.

Moreover, Li Ning Co. Ltd. 's profit, the operation ability performance is quite good, the company achieves steadily, the financial quality is quite healthy, this also deserves affirmation.