LI NING (2331 HK) 1H21 results beat, core categories sell-through grew rapid September 3, 2021 357

PSR Recommendation: ACCUMULATE Status: Upgraded
Target Price: HKDHKD118.45

Investment summary
Li Ning announced the company’s interim results as of June 30, 2021. During the period,
revenue increased by 65% Yoy to CNY 10.20 billion, overall GPM increased by 6.4 ppts to
55.9%, and net profit attributable to the parent recorded CNY 1.96 billion, a Yoy increase 187%,
mainly due to the company’s increased operating leverage, OPM increased by 10.4 ppts to
24.9%. The overall performance is better than the profit alert announcement. The company’s
operating performance continues to improve, and the cash cycle is further shortened by 17
days to 13 days.
OPM improved significantly, and profit in 1H was better than expected
From the perspective of retail sell-through growth, the company’s overall sell-through
(including online and offline) in 1H recorded a low-nineties growth, while offline channels
recorded a high-eighties growth. The company’s direct operating sell-through recorded an
88.5% growth, and the wholesale channel sell-through recorded a high-eighties. By category,
the company’s core category retail sell-through increased by 92% in total. Among the core
categories, sports fashion/running/basketball category sell-through increased by
116%/87%/80% Yoy respectively. During the period, the company’s revenue recorded CNY
10.20 billion, a Yoy increase of 65%, mainly due to the recovery of demand after the epidemic
and the Xinjiang cotton incident to stimulate sales growth. Net profit increased by 187% Yoy
to CNY 1.962 billion, mainly due to the company’s significant Yoy increase in OPM by 10.4ppts
to 24.9%; under operating leverage, NPM increased by 8.1 ppts to 19.2%.

About the author

Profile photo of Timothy Chong

Timothy Chong

Timothy Chong received Bachelor’s Degree with first class honor in Banking and Finance from University of Leicester. He is currently studying Master of investment management in Hong Kong Polytechnic University. Before joining Phillip Securities, Timothy worked at BOCOM international and he is equipped with years of experience in the capital market. Timothy is now a licensed research analyst at Phillip Securities and covers Consumer / Property Management sectors.

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