Lining Operation To Enhance The Achievement Of Inflection Point Future Performance Deserves Attention

In 2015, Li Ning Co realized operating income of 7 billion 90 million yuan, with a net profit of 14 million 310 thousand yuan. After 3 years, it lost its first profit.

In the first half of 2016, the company achieved operating income and net profit of 3 billion 600 million yuan and 110 million yuan respectively, indicating that the company entered a virtuous circle and rebounded.

Establish.

Li Ning Co has a long history of operation (26 years). As a leading industry, its brand value is still outstanding and its industrial resources are very rich.

In the context of the revival of the overall sporting goods industry, the company relied on the "three pillars" strategy of channel innovation, retail optimization and product upgrading to reshape the core competitiveness.

Promotion and cost control support performance is rising, and future performance deserves attention.

In 2015, Lining's market share was 5.5%, ranking second in local brands, second only to Anta.

Channel health situation has improved substantially, and internal and external health has been equally important.

Lining cleared the channel inventory through the "channel revival plan" and integrated the terminal network.

At present, the proportion of new products in the channel has increased from 49% to 54%, and the proportion of new product sales in the first half of 2016 has increased from 69% in the previous year to 76%.

The operation situation has been continuously improved, and the number of operating turnaround days has been shortened from 90 days in 2015 to 75 days.

At the same time, the company optimizes the dealer network, promotes the direct sales ratio, and implements the retail oriented mode to enhance the performance of the store.

Lining recovered the channel expansion in 2015. There were 6169 stores at the end of 6 in 2016, a net increase of 543 compared with the end of 2014.

In addition, Lining's online business performed brighten, doubling 3 times in the same quarter, accounting for 13% of revenue.

Product upgrading, integrated marketing focus

field

The company's positioning is clear for sports companies, its five core business categories, namely basketball, running, badminton, comprehensive training and sports life, the main product performance and function.

Active layout of intelligent equipment, and the development of smart running shoes with Hua Mei technology, 15 years in July, the market has exceeded 700 thousand pairs of sales.

Continue to promote brand younger, integrate offline experience, online purchase O2O mode, and integrate marketing methods to cater for the new generation of consumer demand.

"Overweight" rating, the target price of HK $5.59

We expect the company's 2016/17/18 EPS to be 0.13/0.26/0.37 yuan, corresponding to PE 35.3/17.8/12.3X.

Based on DCF valuation (WACC 10.7%, long term growth rate 2%), the target price is HK $5.59, corresponding to 18.8 times PE. in 2017.