CLSA: LI NING (02331) Q3 retail performance better than expected; maintain "Outperform" rating with target price of HK$20

CLSA issued a research report maintaining the "Outperform" rating and HK$20 target price for LI NING (02331). The bank believes that LI NING's potential 2026 special dividend, along with the LI NING brand's (adult business and Young) third-quarter retail sales being flat year-on-year and performing better than expected, are both expected to provide some support for the share price. The bank noted that LI NING's year-on-year performance outperformed peers' core brands, partly benefiting from a significantly lower comparison base. Among them, LI NING Young continued to be a bright spot, with retail sales growing double digits year-on-year. On inventory, the company's inventory remained stable year-on-year, with the company targeting to reduce inventory to a level equivalent to 4 to 4.5 months of sales by the end of 2026. Since September, the company's discount level has narrowed year-on-year, and management expects this trend to continue in the fourth quarter. CLSA maintained LI NING's 2026 guidance unchanged, expecting full-year sales to achieve low single-digit year-on-year growth and net profit margin to range from mid-to-high single digits. The bank believes that the current valuation has already reflected this year's earnings pressure, and a potential special dividend could serve as a short-term catalyst.