【行业研究报告】李宁-Operating quality to drive earnings growth

LiNing(LN)FY23resultson20
LiNing(LN)FY23resultson20
th
MarwithrevenueandnetprofitofRMB27.6bn(+7%
YoY)andRMB3,187mn(-21.6%YoY)respectively.Andtheydeclaredafinaldividendof
RMB19cents,implyingdividendpayoutratioreached45%(FY22:30%).Wejoinedtheir
postresultpresentation,managementprovidedaconservativeguidance,withsales
growthtargetat~5%andNPMat12-13%inFY24.
FY23resultshighlights:
◼GPMwasflattishasdeeperonlinechannelretaildiscountoffsetthefollowings:
1.+0.4pptfromDTCmixreached25.0%(vs.20.7%inFY22)
2.+0.2pptfromretaildiscountimprovementinDTC
3.+0.2pptfromoperatingefficiencyenhancement
◼3-monthnewproductdiscountdownto20%(vs.22-23%inFY22),withimproved
sell-outrateat78%(vs.52%inFY22)
◼OPMcontractedby6.0pptmainlyduetoS&Dtosalesratioup4.6pptto32.9%
◼Channelinventorydownto3.6months(vs.3.8/4.2monthsinJun23/Dec22)
◼Cashconversioncycleextended5daysto35days,whileoperatingcashflow
reached4.7bn,up20%YoY
FY24targetsandoperationalimprovementplans:
◼Managementtargets5%YoYtoplinegrowthandsteadyonlinesalesgrowth
despitelowbase,whileNPMat12-13%inFY24.Andtheywillcontinuetofocus
onbusinessqualityimprovementthroughactiveorderscontroltodistributors
◼Latestofflinediscountseecontractiondespiteretailsell-throughremainflattish
◼Forstoreoptimizationplan,theyexpectDTC/ChinaLNnetclosureof>20/~30,
whilefranchised/LNYoung/LN1990netopeningat~100/150/5-10
◼TheleasedassetsandstorerelatedPPEimpairment(RMB323minFY23)will
dependonthefoottrafficandstoreproductivityinFY24,weforeseegradualwrite
backalongwithsalesefficiencyimprovementstartingfrom2H24
◼Newmeasureshavebeentakingeffectonunauthorizedsalesactivitieswhich
discoveredinFY23,28corefootwearSKUs(equiv.to~45%ofnewproducts)has
beencontrolledin1Q24,andtheyaretargeting50-60%/100%by2Q/4Q24
Maintain“BUY”withTPatHK$29.4basedon20.0xFY24EP/E
LN’ssharepricehasdropped~58%sincemid-2023duetounauthorizedsalesissueand
lowerconsumptionsentiment.OurestimateonLN’sFY24E/25E/26Erevenueand
earningsatRMB29.3bn/31.3bn/34.6bnandRMB3.52bn/4.10bn/4.92bnrespectively,
correspondingto15.7x/13.5xFY24E/25EP/E.Wemaintain“BUY”ratingonLNwithTP
atHK$29.4basedon20.0xFY24EP/E,equivalentto1s.d.below5-yearaverageP/E,
astheiroperationalqualityimprovementinitiativeshavebeentakingeffect.Webelieveit
islikelytodriveNPMtowards15%inmid-to-longtermsupportedbyhealthyinventory
levelandwell-plannedstorenetwork.