Li Ning's 1Q26 performance was broadly in line with expectations, and Goldman Sachs reiterates its Buy rating

Overview

This report is Goldman Sachs' earnings review of Li Ning Co. (2331.HK)'s 1Q26 operating update. The report believes the company's first-quarter retail sales were broadly at the low end of expectations, the kidswear business grew relatively quickly, and growth in the core adult brand improved; management reiterated full-year revenue and net margin guidance and continues to monitor end-market consumption trends. Goldman Sachs maintains its positive view on the underlying improvement of the Li Ning brand and reiterates its Buy rating.

Core views

The core views are: first, 1Q26 adult retail sales grew by a mid-single-digit rate year over year, a marked improvement from the low-single-digit decline in 4Q25, and total retail sales grew by a high-single-digit rate year over year including kidswear; second, discounting remains under pressure, with both online and offline discounts deepening by low-single-digit percentage points year over year, and improvement depends on demand recovery; third, inventory levels were about 5 months and stable year over year, which management considers structurally healthy; fourth, categories such as running, lifestyle, badminton, and outdoor continue to provide structural support, while the decline in basketball narrowed; fifth, the current valuation remains attractive relative to future reacceleration in revenue and net profit.

Analysis framework

The report assesses the deliverability of full-year guidance, brand improvement, and valuation by combining the company's 1Q26 retail sales, channel performance, category performance, discounting and inventory data, as well as feedback from management's conference call; it also uses peers' retail sales performance over the same period, such as Anta, Fila, Xtep, and Pou Sheng, as references.

Methodology notes

• Valuation methodsP/E target price method

  12-month target price based on 20x 2026E P/E

  Goldman Sachs assigns Li Ning a 12-month target price of HK$26.70 based on 20x 2026E P/E, and compares it with the current price of HK$20.60 to derive approximately 29.6% upside.

• Factor analysisGS Factor Profile

  Percentile comparison of Growth, Financial Returns, Multiple, and Integrated factors

  Goldman Sachs' factor profile compares the stock against the market and industry peers on a relative basis through growth, financial returns, valuation multiples, and integrated metrics.

• M&A frameworkM&A Rank

  M&A Rank 3

  The report discloses that Li Ning has an M&A Rank of 3, indicating a low probability of being acquired, and this ranking is usually not included in the target price.

Asset mapping & comparison

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

• 2331.HK

  Covered stock; Goldman Sachs reiterates Buy rating

  Strengths

  Kidswear, running, lifestyle, outdoor and other businesses provide growth support; inventory is healthy; valuation at about 15x 2026E P/E, or about 10x 2026E P/E excluding cash, is considered attractive.

  Weaknesses

  Discounting deepened year over year, and end-market consumption remains soft; 1Q26 growth landed at the low end of the market's expected range, which may limit room for guidance upgrades.

  Comparison

  Including kidswear, Li Ning's total retail sales grew by a high-single-digit rate year over year in 1Q26; over the same period, the Anta brand, Fila brand, Xtep brand, and Pou Sheng posted high-single-digit, low-double-digit, low-single-digit, and -1% year-over-year growth, respectively.

  Risks

  Same-store sales growth below expectations, intensified competition, and OPEX such as brand investment, store expenses, and labor costs coming in above expectations.

Key data

• 12-month target priceHK$26.70Based on 20x 2026E P/E.
• Current priceHK$20.60Price disclosed on the front page of the report.
• Implied upside29.6%Calculated from the target price relative to the current price.
• 1Q26 adult retail sales+MSD% yoyImproved from -LSD% yoy in 4Q25.
• 1Q26 total retail sales+HSD% yoyOn a basis including the kidswear business; kidswear grew by more than 20% year over year.
• FY26 revenue guidance+HSD%Management reiterated the full-year sales growth target.
• FY26 net margin guidanceHSD% NPMManagement reiterated the full-year net margin target.
• Channel inventory5xAs of end-March, stable year over year, which management considers healthy.
• 2026E revenueRmb31,691.2mnGoldman Sachs forecast.
• 2026E EPSRmb1.22Goldman Sachs forecast.
• 2026E P/E14.7xDisclosed in Goldman Sachs' forecast table.
• Market capitalizationHK$53.1bn / $6.8bnDisclosed in the report's Key Data.

Impact & implications

The report's investment implication is positive: Li Ning's first-quarter growth has entered the trajectory needed to achieve its full-year high-single-digit revenue target, and brand and product improvements continue to emerge, but discounting and consumer demand remain short-term points of debate. If the low base in 2H26 is combined with stable consumption trends, renewed acceleration in revenue and profit could support valuation recovery; however, since 1Q26 was only at the low end of the expected range, the likelihood of guidance being raised during the year may be limited.

Risks

• Same-store sales growth below expectations.
• Intensifying market competition leads to further discounting.
• Brand investment, store costs, and labor costs are higher than expected.
• Weak end-market consumption trends affect discount improvement and sales growth.
• The impact of raw material costs may begin to emerge from 1Q27, with footwear costs potentially affected by 3-4 percentage points.

What to watch

• Whether retail sales trends after April and in subsequent quarters continue at the 1Q26 level.
• Whether the year-over-year deepening discount trend can narrow.
• Whether channel inventory maintains a healthy structure.
• The growth contribution of key categories such as the Glory series, running, lifestyle, badminton, and outdoor.
• Whether revenue and profit reaccelerate in 2H26 on a low base.
• Whether FY26 revenue growth and net margin guidance is maintained or raised.