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LI NING(2331)
Analysis¡G
In the first half of 2024, Li Ning Company Limited (02331) recorded Revenue rose by 2.3% to RMB14,345 million; gross profit margin rose by 1.6 percentage points to 50.4%. Net operating cash inflow increased by 40.6% to RMB2,730 million. Net profit attributable to equity holders was RMB1,952 million with net profit margin of 13.6%, and EBITDA margin was 24.0%. The company continues to adjust the layout of directly-operated stores were further promoted during the period, and the retail sell-through maintained overall stability, resulting in slight period-on-period growth of 2.7% in the revenue from direct operation; the e-commerce channel made greater achievements as it fostered development through new media and new platform, which was consolidated by the rebound of consumer traffic amid the gradual recovery of online consumption vibe, thus recording period-on-period growth of 11.4% in the revenue from e-commerce channel. In the context of a rising tide of national fitness awareness, sports consumption is progressively becoming an indispensable lifestyle choice. The Company will continue to practice its core strategy of "Single Brand, Multi-categories, Diversified Channels", and is expected to achieve stable and enduring growth.
Strategy¡G
Buy-in Price: $19.70, Target Price: $21.90, Cut Loss Price: $18.03
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Report Review of August 2024
Sectors: TMT, Semiconductors, Consumer & Healthcare ¡]Eric Li¡^ TMT, Semiconductors, Consumer & Healthcare ¡]Eric Li¡^This month I released reports of 361 DEGREES INT. (1361.HK). During 2023FY, 361 Degrees International Limited (361 Degrees) recorded a revenue of RMB8,423.3mn, increasing 21.0% YoY. Profit attributable to the equity shareholders of the Company was RMB961mn, representing a YoY increase of 28.7%. A total dividend of HK20.4 cents per ordinary share (equivalent to RMB18.7 cents), representing a dividend payout ratio of 40.2%. In terms of product segment, sales of the company's two core product lines, namely footwear and apparel, increased by 23.0% YoY and 9.8% YoY respectively. For the year under review, the proportions of total revenue of footwear and apparel sales were slightly increased from 41.0% to 41.7% YoY and slightly decreased from 35.2% to 31.9% YoY of the total revenue respectively. This was mainly due to the increase in proportion of sales revenue from 361 Degrees Kids from 20.7% to 23.2% of the total revenue for the year under review, which in turn affected the proportion of sales of various products to total revenue. The average wholesale price (AWP) of footwear and apparel edged up by 3.0% and 0.5% year-on-year respectively. The increase in footwear's and apparel's AWP was mainly due to the upward adjustments of the wholesale prices of the existing products across different product lines in order to cover the increase in cost of production and reflect the continuous brand image enhancement; the upgrade of product mix by launching a variety of new products with a higher AWP; and the increase in proportion of sales revenue generated from the e-commerce business which has a higher AWP than the sales made to distributors, above reasons contributed to increase in AWP as compared to that of last year. In addition, the sales volume of footwear and apparel products increased by 19.4% and 9.4% YoY, respectively. In recent years, as China's consumer preferences leaned towards specialisation, diversification, and cost effectiveness, the company positions as a "professional, youthful, and internationalised" brand. The company has built a diversified brand matrix based on professional functions and its own-branded IP. With 2024 bringing numerous international and domestic sports events, including the highly anticipated Paris Olympics, which are expected to stimulate a broader participation in sports and increase consumer demand. We expect 2024-2025 EPS to be RMB0.49 and RMB0.53 respectively, with PT of HKD4.02, implies a FY2024E P/E of 7.47x (~2-yrs historical average). Our investment rating is ¡§Accumulate¡¨. 
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