Core Viewpoint - The company reported a steady performance in H1 2025, with revenue of 5.705 billion yuan, up 11.0% year-on-year, and a net profit of 858 million yuan, up 8.6% year-on-year, although net profit growth lagged behind revenue growth due to a decrease in interest income and other earnings [1] Financial Performance - The company declared an interim dividend of 20.4 Hong Kong cents per share, with a payout ratio of 45.0%, compared to 40.3% in H1 2024 [1] - The gross profit margin slightly increased by 0.2 percentage points to 41.5% in H1 2025, with adult shoes, adult clothing, children's shoes, and children's clothing gross margins at 43.3%, 41.3%, 42.1%, and 41% respectively [3] - The net profit margin decreased by 0.4 percentage points to 15.0% due to various factors, including a reduction in bank interest income and e-commerce commission income [3] Product Category Performance - Footwear outperformed apparel, with adult clothing revenue growing by 10.9% and children's clothing by 11.4%, accounting for 78% and 22% of total revenue respectively [1] - In the adult segment, footwear revenue increased by 12.8% while apparel revenue grew by only 1.6%, with a notable increase in sales of premium products [1] - In the children's segment, footwear revenue surged by 27.8%, while apparel revenue declined by 7.6%, with the company expanding its product range to include items for teenagers [1] Channel Strategy - E-commerce sales grew significantly, with online revenue increasing by 45.0% year-on-year, while offline revenue saw a slight decline of 1.2% [2] - The company is focusing on quality and efficiency in its store strategy, with a net reduction in the number of stores but an increase in average store size [2] - As of the end of H1 2025, the company had 5,669 adult clothing stores and 2,494 children's clothing stores, with a total of 49 new "super stores" launched [2] Cash Flow and Inventory - Operating cash flow improved significantly, reaching 524 million yuan, up 227.2% year-on-year, driven by reduced inventory and shorter accounts receivable turnover days [3] - The company reported a decrease in inventory to 1.89 billion yuan, down 220 million yuan from the end of 2024 [3] - The company ended the period with a net cash position of 4.3 billion yuan, indicating strong liquidity [3] Investment Outlook - The company is positioned in the mass market with a strong price-performance ratio and is enhancing its competitiveness through channel innovation and product upgrades [4] - The forecast for net profit for 2025-2027 is 1.3 billion, 1.46 billion, and 1.62 billion yuan, respectively, with a low valuation indicated by a PE ratio of 9, 8, and 7 times [4]

Investment Rating - The report maintains a "Buy" rating for the company 361 Degrees [1] Core Views - The company has shown steady growth in performance, with a 11% year-on-year increase in revenue to 5.7 billion RMB and a 9% increase in net profit to 860 million RMB for the first half of 2025, which is in line with expectations [6] - The company plans to distribute an interim dividend of 0.204 HKD per share, with a payout ratio of 45%, up from 40.3% in the first half of 2024, enhancing shareholder returns [6] - The children's clothing segment continues to grow at double-digit rates, while the gross margin for adult apparel has steadily improved [6] - E-commerce channels have shown strong growth, increasing by 45% to 1.82 billion RMB, accounting for 31.8% of total revenue [6] - The company has significantly improved its inventory and operating cash flow, with cash on hand of approximately 4.3 billion RMB and a low debt ratio of 2.2% [6] Financial Data and Profit Forecast - Revenue projections for FY2023 to FY2027 are as follows: 84.23 billion RMB (2023), 100.7 billion RMB (2024), 111.8 billion RMB (2025E), 121.4 billion RMB (2026E), and 130.8 billion RMB (2027E) [5][15] - Net profit forecasts are: 9.6 billion RMB (2023), 11.5 billion RMB (2024), 12.6 billion RMB (2025E), 13.9 billion RMB (2026E), and 15.1 billion RMB (2027E) [5][15] - The gross margin is expected to slightly increase from 41.1% in FY2023 to 41.9% in FY2027 [5][15] - The price-to-earnings ratio is projected to decrease from 11 in FY2023 to 7 in FY2027 [5][15]

Investment Rating - The investment rating for the company is "Buy" (maintained) [1] Core Views - The company reported a steady growth in H1 2025, with revenue reaching 5.705 billion yuan, a year-on-year increase of 11.0%, and a net profit attributable to shareholders of 858 million yuan, up 8.6% year-on-year. The lower profit growth compared to revenue is attributed to a decrease in interest income and other earnings [7] - The company maintains a strong market position with a focus on product upgrades and channel innovation, particularly through the expansion of "super stores" [7] - The financial outlook remains positive, with projected net profits of 1.3 billion, 1.46 billion, and 1.62 billion yuan for 2025, 2026, and 2027 respectively, corresponding to a low valuation with P/E ratios of 9, 8, and 7 [7] Revenue and Profit Forecast - Total revenue is forecasted to grow from 8.518 billion yuan in 2023 to 13.990 billion yuan by 2027, with a compound annual growth rate (CAGR) of approximately 10.57% [1] - Net profit attributable to shareholders is expected to increase from 961.43 million yuan in 2023 to 1.616 billion yuan in 2027, reflecting a CAGR of about 10.89% [1] Segment Performance - In terms of product categories, footwear outperformed apparel, with adult and children's footwear showing strong growth. Adult apparel revenue grew by 10.9%, while children's apparel saw a 11.4% increase [7] - Online sales experienced significant growth, increasing by 45.0% year-on-year, while offline sales saw a slight decline of 1.2% [7] Financial Metrics - The gross profit margin slightly increased to 41.5% in H1 2025, while the net profit margin decreased by 0.4 percentage points to 15.0% [7] - Operating cash flow improved significantly, reaching 524 million yuan, a year-on-year increase of 227.2% [7]