Goldman Sachs slightly raised the target price for LI NING to 19.5 yuan. Sales are under pressure, but the net profit margin has reached the upper guidance level

Goldman Sachs research report indicates that Li Ning (02331.HK) recorded a low single-digit decline in retail sales in the fourth quarter of last year, slightly better than the mid single-digit decline in the third quarter, in line with market expectations. Li Ning's management stated that revenue for the fiscal year 2025 is expected to increase slightly year-on-year, while the previous guidance was flat; the net profit margin is at the high end of the high single-digit guidance, due to better-than-expected government subsidies and control of operating expenses.

Management admitted that they have not observed any signs of improvement in consumer sentiment or promotional environment, and believe that the recovery of brand momentum will take years. In terms of profit margins, the company expects advertising and promotional investments to increase year-on-year in 2026, but aims to further optimize other operating expenses.

The firm raised Li Ning's net profit forecast for 2025 by 15% to reflect better-than-expected government subsidies and expense control, while also raising the net profit forecast for 2026 to 2027 by 1%. The target price was slightly increased from HKD 19.2 to HKD 19.5. The rating is maintained at "Neutral," awaiting signs of a bottoming out in fundamental demand or discount rates