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Morgan Stanley Reaffirms 'Overweight' Rating on Li Ning, Citing August Sales Recovery
Summary
Morgan Stanley has maintained its 'Overweight' rating and HK$22.5 price target for Chinese sportswear giant Li Ning, noting an improvement in sales trends during August after a challenging July.
Morgan Stanley has reaffirmed its “Overweight” rating for Li Ning (2331.HK), maintaining its price target of HK$22.5 for the sportswear company, according to a new research note. The investment bank's positive outlook is supported by signs of a sales recovery in August.
Sales Trends Improve
According to the report, Li Ning's retail sales experienced a high-single-digit decline or more in July. However, the trend improved in August, with overall retail sales reported as relatively stable year-over-year.
The bank noted that the improvement was driven by a narrowing decline in offline sales and a boost in online sales from livestreaming events. While Morgan Stanley believes it is too early to comment on September's performance, it expects the Mid-Autumn Festival holiday to provide support.
AdDiscounting and Inventory Context
Morgan Stanley observed that Li Ning's offline retail discounts deepened from July to August. However, the bank stated this was a result of heightened industry competition and a higher proportion of sales from outlet channels, rather than a push for inventory destocking.
This assessment is supported by the fact that Li Ning had already lowered its orders for the second half of the year. The proactive measure suggests the company is managing its inventory levels amid a competitive market.
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