Lining Is Approaching The High Point Of History. Domestic Sports Brand Has Revival?

Recently, Li Ning Co shares have gone all the way. Statistics show that Lining's stock price has risen by about 127% this year. In July 2nd, the stock price of the company had reached HK $19.08, which is the new share price of the company since 2011.


2018 financial year performance report shows that Lining group's annual business income increased by 18.45% to RMB 10 billion 511 million yuan, and net profit increased 39% to 715 million yuan. Prior to this, Lining's highest revenue was 9 billion 778 million yuan in fiscal year 2010, and it was the first time in 2018 to break 10 billion yuan. At the same time, Anta, XTEP and other domestic sports brands last year's revenue and net profit have achieved substantial growth. Will the industry usher in a new round of development?


Expected profit growth in the first half


Behind the recent surge in Lining's share price is a recent 2019 year mid term performance. After June 24th, Lining released Earnings Preview. It is expected that in the half year ended June 2019, the net profit of the company will increase by more than 440 million yuan over the same period of last year, and its growth rate will reach 164%. The profit is 269 million yuan.


The announcement pointed out that the increase of expected net profit mainly benefited from the expected growth rate of continuing business profits up to 90%, operating profit margins continued to improve, and business revenue was expected to increase by 30%. In addition, in the first half of the year, the one-time non operating profit of Li Ning Co was not less than 200 million yuan, mainly from investment income, which was caused by a large increase in non operating profits and non operating special projects. If the investment income is removed, the net profit of the parent company is expected to grow by 102% in the first half of this year.


As Lining announced his earnings in the first half of 2019, the research report released by Guotai Junan Securities is expected to exceed expectations in the first half of 2019. The first half of 2019 increased by 30% over the same period of last year. Net profit is expected to be no less than 440 million yuan, equivalent to about 64% year-on-year growth. Net interest rates are expected to improve by 1.5 percentage points to 7.2% over the same period last year.


Guotai Junan Securities also pointed out that the transformation of the company's brand image and product design has proved to be well recognized by consumers, and the retail sales volume has increased strongly. The agency expects the "China Lining" brand to grow more strongly in the next few years, raising 5.2%, 8.5% and 11.4% of the 2019-2021 year revenue forecasts respectively.


The road to prosperity and decline in the past twenty-eight years


Statistics show that Mr. Lining, as a famous Olympic champion in China, founded the "Lining" sports brand in 1990. During this period, the company pioneered the establishment of the franchise marketing system and self distribution network in the whole country. At the same time, with the help of personal influence and the sponsorship of the Asian games and Olympic Games, Lining was quickly launched into the leading brand of sports brand in Russia.


Since then, the Lining group has adopted the policy of channel expansion and signed further cooperation with international competitions, which greatly enhanced Lining's international status. In 2004, Lining was successfully listed in Hongkong and became the first domestic sports brand to be listed. In the 2001-2010 year, the compound annual growth rate of the company's operating income reached 33%, and the compound annual growth rate of net profit reached 41%. Some analysts believe that this period is the golden ten years of the development of the industry, and also the ten year of Lining's gold. However, in the 2011-2014 year, due to the lack of dynamic demand in the external industry, the continued downturn, coupled with the failure of the adjustment and transformation of the internal company, and the loss of successive years, it lost the dominant position of the domestic sports brand.


The market analysis points out that the internal reasons are as follows: first, the rapid expansion of the pre distribution channels, and the lagging sales and weak management capabilities of the terminal stores aggravate the impact of backlog. Secondly, the company has made mistakes in brand transformation and strategic positioning, and blindly caters to the younger generation of consumers. In addition, there are some problems in the adjustment of pricing and organizational structure.


Sports apparel industry stabilizes


However, the downturn in the industry soon came to an end. Data show that the Chinese sports apparel industry has been relatively stable since 2015 and has basically been adjusted to 2017.


Tianfeng Securities believes that before the industry downturn, the sports brand revisited the problem of enterprise development, adjusted the channel structure and cleaned up inventory, and then the number of main leading companies began to pick up. In 2016, Lining's main brand store increased from 6133 in 2015 to 6440, ending the negative growth of shops in previous years. The number of Anta stores increased from 7031 in 2015 to 8860, ending the adjustment of the number of stores in the early stage; the number of stores in the 31st and XTEP main brands still declined, but the drop in space was not large enough. At the same time, after a series of measures such as closing stores, clearing stocks, improving store efficiency and management, sports brand turnover has improved significantly, and the absolute size of most of the company's inventory is also lower than that of 2014.


According to Euro international data, the scale of sports brand industry in China reached 264 billion 760 million yuan in 2018, an increase of 19.52% over the same period last year, and the scale growth rate increased year by year. According to the international data forecast, the composite growth rate of China's sports brand industry will reach 7.6% in the next 5 years. In 2023, the scale of China's sports brand is expected to reach 434 billion 750 million yuan.


At the same time, the agency's research also shows that China's sports footwear industry has a high degree of concentration and is expected to continue to improve, leading brands will continue to benefit. Data show that in 2010 -2018, China's sports shoes and clothing industry accounted for the top five market share increased from 44.7% to 57.3%, the top ten market share increased from 65.2% to 71.6%, the industry concentration in the future is expected to continue to improve, leading enterprises will get more opportunities.