升级为买入：品牌上升周期的积极期权价值
Li Ning (2331 HK) 2026 earnings expectations to a more realistic level 24.4022.90 products should drive an earnings upcycle from2027 HKD22.90), mainly driven by higher 2027-28e earnings April, Li Ning's share price has outperformed the HsI index by 19ppts, supported byoptimismoverstrong1Q26toplinegrowth.However,itssharesweredownby13%fromthepeakwithweakeningsalesmomentumsinceMarch,drivenbysofterconsumer demand and intensifying competition, which has likely reset marketexpectations to a more realistic level -removing a major overhang on shareperformance.Wecutour2026enet profit by9%and nowexpectearnings to declineby 4.1% y-0-y to RMB2,816m on revenue growth of 5% (previously 7%). Brandupcycle to lead to earnings recovery from 2027: 2026 will mark the first fullyear of Li-Ning's exclusive sponsorship (2025-28) of China's Olympic delegation.Together with a refreshed product pipeline and continued rollout of Golden Label seriesand Dragon stores, we expect the brand to end its relative underperformance vs.theindustry from 2026 with sales accelerating further into 2027.However, earningsrecoveryshouldlagduetofront-loadedbrandinginvestments.Afterlowering2026eearnings,we raise 2027e earnings by3% and expect net profit to grow by 21% y-o-ysupported by core Li Ning revenue growth accelerating to 7% (vs. 5% in 2026) and netprofit margin recovering to 10.2% in 2027e (vs. 9.0% in 2026e).Our 2026e net profitremains9%belowconsensus,whileour2027forecast isonly2%belowconsensus. Positive optionality on the upcycle: During its brand downcycle from 2022-25, Li Ningtraded at an average 1-year forward PE of 18.2x. Its current valuation of 14.2x 1 year-forward PE (based on our estimate) suggests limited downside if the brand cyclestabilises.As brand momentum and earnings recovery emerge, we see scope for a re-rating.Key catalysts include improving brand momentum from increased marketingspend, stronger consumertractionforthe newGolden Label series and its running serieswith new“Super BOOM Capsule"technology as well as rising brand association ahead ofthe 2028Olympic Games.Our valuation scenario implies 48% upside in our bull case. Lina Yan*, CFAConsumer Analyst, Hong Kong and mainland ChinaThe Hongkong and Shanghai Banking Corporation Limitedlinayiyan@hsbc.com.hk+85228224344 Yimin Wang*Associate,China ConsumerResearch The Hongkong and Shanghai Banking Corporation Limitedyimin.wang@hsbc.com.hk+85256965573 Upgrade to Buy from Hold: We raise our target price by 6.6% to HKD24.40 (fromHKD22.90),primarily driven by higher earnings forecasts from2027 onward.OurWACCof10.9%andterminalgrowthof0.0%remainunchangedinourDCFmodelOurnewTPimplies 2026/27e PE of 19.3x/16.0x.Downside risks:weaker-than-expected margin if the market remains highly promotional. *Employed by a non-US affliate ofHSBC Securities (USA) Iinc, and isnot registered/qualified pursuant to FINRA regulations HSBCFunding theFutureSurvey Sentiment, Al and Private CreditClick to view Issuer of report: The Hongkong and ShanghaiBanking Corporation Limited Disclosures&Disclaimer This report must be read with the disclosures and the analyst certifications inthe Disclosure appendix, and with the Disclaimer, which forms part of it. ViewHSBC Global Investment Researchat:https://www.research.hsbc.com Positive optionality on thebrand upcycle Weakening salesmomentum since Marchshouldhavereset2026earnings expectationstoamore realistic level+Spending on Chinateamsponsorshipand revamped productsshould drive an earnings upcycle from 2027+UpgradetoBuy(fromHold)with6.6%higherTPofHKD24.40(fromHKD22.90),mainly drivenby higher2027-28e earnings ConsensusEPSrevisionvs.PE case scenario implies 48% upside and our bear case scenario gives 0% upside from the currentshareprice. As discussed earlier, we now lower our 2026e net profit by 8.8%on 1.7%lower revenue growth in 2026e picking up to 5.4%, from 3.2% in 2025. In 2027e, we expect its revenue growth to accelerate to 7.2% (previously: 4.2%), and it netmargintorecoverto10.2%,drivenbypositiveoperatingleverage.Ourcurrent2027enetprofitis 3.1% higher than before on 1.1% higher revenue estimate. Wealsoraiseour2028enetprofitby4.7%on2.5%higherrevenueestimate.Shouldthe2028Olympics effectget more prominent, there could be furtherupsideto our 2028 estimates. 14.3% in 2030e (previously 12.2% in 2026e to 13.3% in 2030e); (2) sales CAGR of 5.6% in2026-30e (previously 4.2%); (3)capex intensity (capex as a percentage of sales)decreasing to28% in the forecasting period (previously 26%), Disclosure appendix The following analyst(s), economist(s), or strategist(s) who is(are) primarily responsible for this report, including any analyst(s) whose name(s) appear(s) as author of an individual section or sections of the report and any analyst(s) named as the coveringanalyst(s) of a subsidiary company in a sum-of-the-parts valuation certifies(y) that the opinion(s) on the subject security(ies) orissuer(s), any views or forecasts expressed in the section(
