Li Ning's 2Q retail sales are under pressure in line with expectations, long-term growth investment is maintained, and the positive rating rating remains unchanged (J.P. Morgan)
J.P.
J.P. Morgan's report pointed out that Li Ning's retail sales faced headwinds in the second quarter. The business excluding children's clothing declined by low single digits year-on-year, while the business including children's clothing remained flat, in line with market expectations. Despite short-term sales pressure, the company's inventory remains healthy, and management maintains full-year guidance for low-single-digit sales growth and low-single-digit net profit margins. The report emphasizes that the company is continuing to promote long-term strategic investment in R&D and branding, and is maintaining profit margins through measures such as supply chain optimization and closing inefficient stores. The market had already expected weak consumption, so this expected data did not trigger greater panic. The potential transaction implication is that the company's investments in long-term growth are underpinning its value, and multiple retail catalysts in the second half are expected to support recovery. The current share price has partially reflected the weakness in the second quarter, but the valuation is still attractive. One-sentence conclusion: Li Ning's short-term performance is in line with pessimistic expectations, and the market focus is turning to its long-term brand resilience and retail catalysis in the second half of the year, maintaining an positive rating rating. Positive/negative: Positive for Li Ning (2331.HK). The current stock price has been partially priced into the weakness of 2Q retail data. Catalysts: 1) The specific implementation of retail catalysts in the second half of the year; 2) The progress of achieving the full-year "low single-digit" sales growth guidance; 3) Same-store sales growth data.