Goldman Sachs: LI NING (02331) Q3 operations in line with expectations; proposed special dividend is a positive surprise

Goldman Sachs released a research report stating that LI NING's (02331) Q3 operational update and recent commentary were broadly in line with the bank's and market expectations. The proposed special dividend is a positive surprise and could serve as a share price catalyst. The bank maintains its "Buy" rating with a 12-month target price of HK$19.5. The bank believes that fundamental improvement is crucial for a more sustainable share price rebound, but with strong net cash support, coupled with recent major shareholder increases and buybacks, the emphasis on shareholder returns should provide support for the share price in a volatile environment. LI NING's Q3 overall retail sales were flat, with trends improving sequentially during the quarter. On discounts, offline/online deepened by low single digits/slightly deepened year-on-year respectively. Inventory was approximately 5 to 6 times, broadly stable year-on-year, with healthy inventory age; management's year-end inventory target is 4 to 4.5 months. The company maintained its FY2026 guidance, namely low single-digit year-on-year sales growth and mid-to-high single-digit net margin. Looking ahead to 2027, management does not assume a significant macro recovery and will prioritize operational quality over scale growth. The board will discuss the potential special dividend on November 5, with details still subject to board approval. The bank noted that the stock currently trades at approximately 12x 2026 forecast P/E, or approximately 4x ex-cash P/E, and valuation is not demanding; the bank's target price is based on 18x 2026-2027 forecast P/E.