WHAT THE BROKER SAYS

Sports goods manufacturer Li Ning is positioned to benefit from the success of China at the Athens Olympics and publicity leading up to the 2008 Beijing games. This, with increased leisure spending, bodes well for the market in China, says DBS Vickers Securities.

The broker expects Li Ning's earnings to grow by 25 per cent a year from 2004 to 2006, driven by network expansion and margin improvement. It recommends Li Ning as a 'buy' and sets a one-year price target of HK$3.40. At this price, and if earnings improve as expected, the counter would trade a 22.5 times price/earnings.

The company is expected to make a net profit of 127 million yuan this year, 164 million yuan next year and 198 million yuan in 2006.

Strong distribution aside, Li Ning is distinguished from the other manufacturers in having an effective marketing strategy, the most recognised effort beings its sponsorship of Chinese Olympic athletes. This, coupled with its focus on product development, should strengthen the company's brand reputation.

DBS Vickers believes momentum may enable the share to exceed its price target if earnings surprise to the upside.

The counter closed at $3.03 on Thursday.