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On Thursday, Bernstein SocGen Group issued a new rating for Li Ning Co. Ltd. (HK:2331:HK) (OTC: LNNGF), marking the company’s shares with an Underperform rating and setting a price target of HK$13.00. The reinstated coverage comes as the firm identifies several substantial challenges that the sportswear manufacturer is currently facing.
Analysts at Bernstein SocGen highlighted a combination of factors contributing to their decision, including Li Ning’s decelerating growth, difficulties in brand positioning, and a lack of response to the evolving market demand for specialized sportswear. These issues have led to a mid-single-digit topline growth for Li Ning, which analysts believe reflects broader macroeconomic challenges and specific execution problems within the company.
The positioning of Li Ning’s products is also under scrutiny, as the brand navigates a competitive space between lower-priced domestic offerings and discounted international brands. Bernstein SocGen analysts point out that this middle ground has become increasingly problematic for Li Ning.
Further complicating the outlook for Li Ning is the company’s failure to adapt to the market’s shift toward specialized and functional sportswear segments. As consumers show a preference for sportswear that caters to specific athletic needs, Li Ning’s generalist approach could be a disadvantage.
The price target set by Bernstein SocGen is based on an 8.5 times multiple, which implies a Price Earnings Growth ratio (PEG) of 1. This valuation reflects the analysts’ assessment of the headwinds faced by Li Ning and their expectations for the company’s financial performance moving forward.
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