LI NING(2331.HK)：3Q25 PROVES PAINFUL TRANSFORMATION STILL ONGOING

机构：中银国际
研究员：Tony LI/Penny PENG

　　LN’s 3Q25 overall retail sell-through was down by MSD YoY, and itsoffline channel even registered HSD YoY decline. While the Companyattributed this to the weakness of the overall consumer market, webelieve its past reliance on basketball and athleisure has also causedits underperformance as the two categories are under more pressure.
　　Although the mgmt. reiterated its guidance is unchanged at this point,and LN may bring some surprises as it kick starts its Olympicscampaign, we believe the downside risk on the absolute amount of NPcould be higher after its weak 4Q25 start. Considering the risks, weview the current valuation of 17x/16x 2025/26 P/E appears full. MaintainHOLD.
　　Key Factors for Rating
　　3Q25 retail sell-through (-MSD YoY) weaker than our expectations.
　　During 3Q, LN’s retail sell-through was down MSD YoY, below our expectationsand underperformed domestic players which achieved positive growth. LN’soffline channel even registered HSD YoY decline, reflecting challenges in itsordinary stores as retail traffic had either diverted to its outlets or e-commerce,both offering steeper retail discounts. LN’s overall sales also decelerated duringthe quarter, with July being the best month (down LSD YoY). As the quarterlysales also missed the Company’s internal target, its inventory turnover reached5-6 months. Although still within a level that is deemed healthy, we note this isalso higher than its past average and peers of 4-5 months.
　　Basketball and athleisure dragged sales despite other breakthroughs.
　　On the conference call, mgmt. mentioned 9M25 sales for basketball andathleisure dropped by >20%/HSD YoY respectively. Considering the twocategories accounted for 17%/29% of the retail sales mix in 1H25, the impactof their underperformance could be notable. On the positive side, LN’s otherproduct categories such as running (34% of 1H25 retail sales) and training(16%) achieved double-digit growth in 9M25 thanks to new product launches,but they also faced pressure in 3Q25 as sales decelerated.
　　We note downside risks despite guidance reiterated. Mgmt. expected4Q25 to face more pressure as competition of e-commerce campaign looms.Still, they emphasised they would try to achieve the 2025 full year guidance, i.e.flattish revenue and NPM to be HSD. We believe it would depend on theexecution of its upcoming campaigns, particularly around the Milano CortinaWinter Olympic Games to be held in Feb 2026. We expect the market may reactpositively to some of its product launches, but considering the sales contributionof Olympic-related products could be limited, we believe the risk of LN’s 2025NP missing the expectation of bullish investors could not be ignored, esp. whenthe definition of HSD NPM could be vague.