Li Ning Lowers FY26 Guidance; Brand Investment Weighs on Profitability; Nomura Cuts Target Price to HKD13.80

Overview

This report assesses Li Ning’s 1H26 results, the reduction in FY26 guidance, and the impact of increased brand investment on future growth and profitability. Nomura’s core view is that weak consumer demand, intensifying industry competition, and insufficient momentum in core categories mean incremental brand investment is more likely to erode profits in the short term than rapidly drive sales growth. It therefore lowers its forecasts and target price while maintaining a Neutral rating.

Core views

Li Ning held its 1H26 results briefing after announcing interim results on August 21, 2026, with results slightly below expectations. Management lowered its FY26 YoY revenue growth guidance from the previous high-single-digit level to low-single-digit growth and reduced its net profit margin guidance from high-single-digit to mid-to-high-single-digit. The company acknowledged pressure from three areas: weak consumer demand, intensifying competition in China’s sportswear industry, and its own operational issues. Momentum in the core running category slowed markedly, with 1H26 sales declining 3% YoY, while quarter-to-date sales sentiment in 3Q26 continued to weaken with no improvement yet apparent. Despite a relatively low base in 2H25, Nomura still considers the performance of the running and basketball categories modest and believes visibility on Li Ning’s 2H26 sales outlook remains limited. The primary pressure on profitability stems from increased brand investment. Li Ning is allocating more resources to the core LI NING brand, including sponsorships of high-profile events such as the Chinese Olympic Committee, Wuxi Marathon, and Chengdu Marathon, as well as the Stephen Curry partnership and elite athlete resources. Nomura recognizes the company’s strategic direction of sustained investment in its brand and products but expects expenses related to partnerships, events, and national team sponsorships to continue weighing on operating margin in the short term. In an environment of weak consumer sentiment and intense competition, these investments may not generate reasonable returns. The report therefore concludes that brand investment is more likely to burden profitability in the near term than translate into sales growth. The report also compares the strategic paths of Li Ning and Anta. Li Ning focuses on continuously building a single core brand and executing a “single brand, multiple categories, multiple channels” strategy. Anta, by contrast, acquires satellite brands with established positioning and awareness, then leverages its channel operation capabilities in China to cover different consumer segments ranging from mass market to premium. Nomura believes that Anta’s multi-brand approach and channel capabilities currently provide relatively greater growth certainty. It therefore continues to prefer Anta within China’s sportswear industry while remaining cautious about the returns on Li Ning’s brand investment. Based on more conservative margin assumptions, Nomura lowered its FY26-28 revenue forecasts by 1%-2% and earnings forecasts by 11%-20%, including a 20% cut to its FY26 earnings forecast. The target price was reduced from HKD16.00 to HKD13.80, based on an unchanged target P/E of 13.0x FY26 forecast earnings. Another valuation description refers to 13x forward 12-month P/E, slightly above the company’s five-year average forward 12-month P/E of 12x. At the time of the report, Li Ning was trading at 14.9x FY26 forecast P/E, with a closing price of HKD14.46 on August 20, 2026. The new target price implies 4.6% downside. Nomura therefore maintains its Neutral rating.

Analysis framework

Nomura first identifies changes in revenue guidance, margin guidance, and recent sales trends based on the 1H26 results and management briefing, then explains the reductions in terms of consumer demand, industry competition, core category performance, and the company’s operating efficiency. The report subsequently assesses the impact of expenses related to events, national teams, and athlete partnerships on operating margin and evaluates investment returns by comparing Li Ning’s brand portfolio and channel strategy with Anta’s. Finally, Nomura lowers its FY26-28 revenue and earnings forecasts accordingly and applies an unchanged target P/E of 13.0x to revised FY26 earnings to derive the new target price.

Methodology notes

• Valuation MethodPE/PEG valuation

  Forward 12-Month P/E Valuation

  The report applies a target P/E of 13x to the reduced FY26 earnings forecast to calculate a target price of HKD13.80. This multiple is slightly above the company’s five-year average forward 12-month P/E of 12x.

• Company Fundamentals and Financial Framework

  Revenue and Margin Forecast Revisions

  The report re-estimates FY26-28 revenue and earnings based on management’s lowered revenue growth and net profit margin guidance, category sales trends, and incremental brand expenses.

• Competition and Strategy Framework

  Comparison of Brand Investment Paths and Peer Strategies

  The report compares Li Ning’s investment in a single core brand with Anta’s strategy of acquiring established satellite brands and leveraging its channel capabilities, using this comparison to assess the certainty of returns from the different strategies under the current consumption and competitive environment.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Li Ning (2331.HK)

  Report subject; reduced FY26 guidance, slowing core categories, and increased brand investment jointly weigh on short-term profitability.

  Strengths

  A well-known professional Chinese sports brand and China’s second-largest sportswear group; it continues to invest in its brand and products while adopting a “single brand, multiple categories, multiple channels” strategy.

  Weaknesses

  1H26 running category sales declined 3% YoY, basketball and running performance remained modest, sales sentiment continued to weaken, and operating efficiency and returns on brand investment face pressure.

  Comparison

  Compared with Li Ning’s focus on building its core brand, Anta acquires established satellite brands and uses its channel capabilities to cover different consumer segments; Nomura continues to prefer Anta.

  Risks

  A weak macroeconomic environment and lower-than-expected operating efficiency could further weigh on the target price; stronger-than-expected performance in basketball, sports lifestyle, or lower-tier cities could provide upside.

Key data

• FY26 Revenue Growth GuidanceLow-single-digit YoY growthPrevious guidance was for high-single-digit YoY growth
• FY26 Net Profit Margin GuidanceMid-to-high-single-digitPrevious guidance was high-single-digit
• 1H26 Running Category SalesDown 3% YoYReflects slowing momentum in the core category
• FY26-28 Revenue Forecast AdjustmentCut by 1%-2%Mainly reflects a more cautious operating outlook
• FY26-28 Earnings Forecast AdjustmentCut by 11%-20%Including a 20% cut to the FY26 earnings forecast
• Target PriceHKD13.80Lowered from HKD16.00
• Closing PriceHKD14.46As of August 20, 2026
• Target Price Implied Change-4.6%Relative to the closing price stated in the report
• Target Valuation Multiple13.0x FY26 forecast P/EMultiple remains unchanged; on a forward 12-month basis, it is slightly above the five-year historical average of 12x
• Current Valuation14.9x FY26 forecast P/ETrading valuation stated in the report
• Market CapitalizationUSD4,859.5mnKey data from the report
• Three-Month Average Daily Trading ValueUSD42.9mnKey data from the report
• Free Float89.4%Key data from the report
• Absolute Share Price Performance1 month -3.5%; 3 months -21.5%; 12 months -21.3%In HKD terms
• Performance Relative to the Hang Seng Index1 month -5.7%; 3 months -21.7%; 12 months -23.4%Relative performance stated in the report

Impact & implications

The report believes that lower FY26 revenue and net profit margin guidance indicates Li Ning faces not only industry demand issues but also pressure from core category momentum and operating efficiency. Event, national team, and athlete sponsorships support long-term brand building, but during a period of moderate demand and intensifying competition, expenses will be recognized before sales returns, which remain uncertain, placing short-term margins and earnings forecasts under pressure. Nomura therefore lowers its target price and believes Anta’s multi-brand and channel operation approach currently offers relatively greater certainty.

Risks

• Upside risk: A stronger-than-expected recovery in the basketball and sports lifestyle categories.
• Upside risk: Better-than-expected performance in lower-tier cities.
• Downside risk: Continued weakness in the macroeconomic environment.
• Downside risk: Weaker-than-expected operating efficiency.

What to watch

• Monitor whether quarter-to-date sales sentiment in 3Q26 can stabilize and improve.
• Monitor the extent of recovery in the running, basketball, and sports lifestyle categories in 2H26.
• Monitor sales performance in lower-tier cities.
• Monitor the impact of the Stephen Curry partnership and event and national team sponsorship expenses on operating margin.
• Monitor whether brand investment can translate into verifiable sales growth and reasonable returns.