Li Ning Earnings: Selloff Following Disappointing Guidance; Fair Value Estimate Cut 15% to HKD 37.50

Li Ning's shares fell 20% on Oct. 26 after the company released disappointing third-quarter sales while cutting full-year revenue guidance. This is the last Chinese sportswear company to report third-quarter numbers, and its poor performance stood out. We believe Li Ning is facing company-specific issues, and investors should not extrapolate these issues as a sign of weakness across the entire industry. Considering management's latest guidance, we lowered our fair value estimate on Li Ning by 15% to HKD 37.50. While shares are more attractively priced now than they were six months ago, Li Ning is still facing heightened competition, particularly as the polarization of consumer spending continues to exert pressure on the midrange segment. Among our China sportswear coverage, our preferred picks remain Anta Sports and Shenzhou International, both trading at larger discounts to our fair values.