Li Ning's stock price plummeted 5.01% during intraday trading on Wednesday, as investors reacted to concerns about the company's profitability. The Chinese sportswear giant is facing challenges due to its aggressive discounting strategy, which is expected to put pressure on its full-year gross margins.

According to analysts at UOB Kay Hian, Li Ning is likely to continue deepening discounts in the second half of the year. This trend, which became more pronounced over the first half and into the early months of the second half, is expected to persist. The company may also face higher advertising and promotional costs related to its partnership with the Chinese Olympic Committee, further squeezing its profit margins.

Adding to the concerns, Li Ning's management has indicated weakening footfall at stores moving into the third quarter, suggesting potential challenges for offline sell-through in the second half of the year. In light of these factors, UOB Kay Hian has downgraded Li Ning to a "hold" rating from "buy," while maintaining a target price of HK$18.90. The stock's significant drop today reflects growing investor unease about the company's near-term prospects in a competitive sportswear market.