Investment Rating - The report initiates coverage on 361 Degrees with a "Buy" rating and a target price of HKD 5.32 [2] Core Views - 361 Degrees is the fourth-largest domestic sportswear brand in China, focusing on "professionalism, youthfulness, and internationalization" [2] - The company is expected to achieve net profits of RMB 1.11 billion, RMB 1.28 billion, and RMB 1.48 billion for 2024E, 2025E, and 2026E, respectively, with EPS of RMB 0.53, RMB 0.62, and RMB 0.72 [2] - The company's valuation is attractive, with a 2024E PE of 7.42x and PB of 0.78x [2] Key Highlights Highlight 1: Leveraging Cost-Effective Consumption Trends - 75.9% of 361 Degrees' domestic stores are located in third-tier and below markets, differentiating its positioning from competitors [3] - The brand's core price range on Tmall is below RMB 200, compared to RMB 200-400 for competitors, emphasizing cost-effectiveness [3] - The company focuses on technology-driven product innovation, particularly in running, basketball, and sports lifestyle categories [3] Highlight 2: E-commerce Driving High Growth - E-commerce revenue CAGR from 2020 to 2023 was 43.2%, contributing significantly to growth [4] - Online revenue accounted for 24.3% of total revenue in 1H24, with room for further growth through platforms like Douyin and Kuaishou [4] - 87.3% of online products are exclusive to e-commerce, helping maintain price stability and create hit products [4] Highlight 3: Children's Wear as a Second Growth Curve - The children's wear market is growing, with sports-related children's wear penetration increasing [5] - 361 Degrees' children's business accounted for 23.2% of revenue in 2023, with a 5-year CAGR of 19.1%, significantly higher than the company's overall growth rate [5] - The company has room to expand its store count and improve store efficiency in the children's wear segment [5] Financial Forecasts and Valuation - Revenue is expected to grow from RMB 8.42 billion in 2023 to RMB 12.94 billion in 2026E, with a CAGR of 15.4% [6] - Net profit is projected to increase from RMB 961 million in 2023 to RMB 1.48 billion in 2026E, with a CAGR of 15.5% [6] - ROE is expected to rise from 10.05% in 2023 to 12.32% in 2026E, reflecting improving profitability [6] Industry Trends - The sportswear industry is benefiting from increasing health consciousness and the trend of casual and sporty attire [19] - Domestic brands are gaining market share, with 361 Degrees' market share increasing by 0.7 percentage points to 3.4% from 2020 to 2023 [29] - The children's wear market is expanding, with sports-related children's wear penetration expected to continue rising [5] Company Strategy - 361 Degrees focuses on low-tier markets and cost-effective products, with 75.9% of stores located in third-tier and below cities [3] - The company is enhancing its e-commerce capabilities, with online revenue expected to grow further through new platforms [4] - The children's wear segment is a key growth driver, with plans to expand store count and improve store efficiency [5]
361度：以大众+专业为本，乘质价比消费东风