Li Ning Has A Bad Future In Diversification

Since its listing in Hong Kong in 2004, Li Ning The company's performance continued to grow, and reached its peak in 2009, becoming the representative of Chinese sports brands. However, since 2010, the industry downturn has caused the company's performance to decline, high inventory pressure, brand decline, and high level personnel turbulence, and Li Ning began to go downhill. Recently, another 25% equity was transferred to related companies, which means Li Ning may enter the real estate industry again. It is difficult for Li Ning, whose sports brand has lost its leading position, to break new ground in the real estate market under strict regulation.

　 Rather implement capital operation or enter the real estate industry again

Li Ning announced on the 17th that, Extraordinary China It has agreed to acquire 266 million shares of the company, accounting for about 25.23% of the issued share capital of the company, with a price of HK $1.359 billion. This is the first cooperation between the two companies since Fantasy China failed to acquire Li Ning last year. The acquisition of Li Ning shares by Fantasy China is a "white wolf with empty hands". Its purpose is to rapidly expand Fantasy China and develop the mainland real estate business by backdoor. This means that Li Ning may enter the real estate industry again.

　　 stock right The way to acquire the failed real estate was frustrated

In April 2010, by subscribing preferred shares and convertible bonds of Joy Energy Saving (later renamed as Fantasy China) at an ultra low price, Li Ning Brothers obtained 80% of the equity of Joy Energy Saving at a price of about 700 million yuan. Joy Energy Saving became another operation platform of Li Ning in the capital market besides Li Ning Company.

In August 2010, Li Ning announced that it would inject all about 31% of its shares in Li Ning into Fantasia China. At the same time, it also purchased Shenyang Industrial Park and Eco City projects, and planned to enter the real estate industry, combining sports and real estate. Since then, Hong Kong Stock Exchange has ruled the acquisition of Li Ning by Fantastic China as "anti acquisition", and the market value of Li Ning's stock on that day has shrunk by more than 3 billion yuan. At that time, although the company said it would appeal, the acquisition ended in vain. Li Ning's dream of entering real estate for the first time was shattered.

　　 At the beginning of the year, private placement was introduced to dilute Li Ning shares

In January this year, Li Ning announced that it would issue five-year convertible bonds with a total principal of 750 million yuan to the famous American private equity fund TPG Group and Singapore Government Investment Corporation (GIC). The equity structure of the company shows that after the conversion of convertible bonds, the shares of Li Ning held by the major shareholder Li Ning in his private name will be diluted from 30.803% to 27.678%.

　　 The leading position of domestic sports does not exist

Turning back to 2004, Li Ning Company, which had just been listed in Hong Kong, was in its prime. In 2008, at the Beijing Olympic Games, Li Ning lit the torch and became the focus of global attention, pushing the company's marketing to the peak. In 2009, its sales in the mainland market exceeded Adidas for the first time. However, in recent years, after the shock of high-level personnel, the company's performance has declined significantly, and the stock price has fallen sharply. Li Ning, the leading sports brand, is no longer famous.

　 Li Ning's main business has been surpassed by rivals

Due to unresolved inventory pressure, together with factors such as declining market growth and shrinking orders, the performance of most sports brands declined in the first half of this year compared with last year. Among the six domestic brands, Li Ning's net profit declined the most.

Li Ning's medium-term performance this year showed that its operating revenue in the first half of the year decreased by 9.5% year-on-year to 3.88 billion yuan, and its net profit fell by 85% to only 44 million yuan. Both its revenue and net profit were far less than that of Anta, the former "loser", and its leading position in the industry disappeared.

In 2011, the administrative expenses of Li Ning Company increased by 16.0% to 717 million yuan on a year-on-year basis when the revenue declined on a year-on-year basis; The distribution cost increased by 15.9% year on year to 2.91 billion yuan. Anta, whose revenue is similar to that of Li Ning, has a distribution cost of 1.45 billion yuan and an administrative expenditure of 373 million yuan, both about half of that of Li Ning. Therefore, there is a big gap between Li Ning and her peers in cost control.

　　 Sports brands encounter high-level personnel turbulence in cold winter

Since the introduction of TPG, a private equity investment institution, as a strategic investor this year, Li Ning has carried out a series of drastic reforms, among which the change of the company's senior management is particularly noticeable. Following the resignation of CEO Zhang Zhiyong three months ago, the CFO and company secretary also resigned recently. Key positions such as CEO and CFO are still vacant. The market expects more personnel changes in the future, and it will take time for the company management to get on track.

　　 The market of "left hand to right hand" is not optimistic

Judging from the results of "voting with feet" in the market, there are mostly pessimistic interpretations of this transaction. On the 17th, Li Ning's shares rose by HK $0.05 to a maximum of HK $4.91 per share. Since then, it has gone downhill. By the end of the day, Li Ning's share price had fallen by 4.76% to HK $4.6.

　 Real estate and finance are not serious business

At present, the performance of Li Ning Company is gradually declining, and Li Ning's personal investment behavior is not serious. It is not suitable to enter into real estate in a large scale clothing Enterprises, especially famous brand enterprises like Li Ning. Because its own gross profit margin has never lost to real estate enterprises, according to Li Ning's previous financial reports, the overall gross profit margin can reach 47%, and the gross profit margin of real estate business is generally 30% - 40%.

　　 Doing well in sports brand is fundamental

At the moment when the internal competition of sports brands is becoming more and more fierce, the real way out for Li Ning, whose main business performance has declined significantly, is no longer to carry out "left hand to right hand" capital operation and enter the real estate industry, but to focus on core business, improve operating efficiency, improve net profit margin, regain the original leading position in China, and even break through Nike Adidas and other world sports Clothes & Accessories The pressure of the giant reappears the glory of surpassing Adidas at the peak of that year.

　 epilogue

As the former leader of sports goods in the mainland, Li Ning Company expects that its profits will fall sharply this year. At this time, it may be difficult to change the current situation of weak performance growth by shifting capital and entering real estate again.