Core Viewpoint - 361 Degrees reported a solid performance in the first half of 2025, with revenue and net profit increasing by 11.0% and 8.6% year-on-year, respectively, indicating a positive growth trajectory for the company [1][2]. Financial Performance - The company achieved a revenue of 5.7 billion yuan and a net profit of 0.86 billion yuan in H1 2025, with an EPS of 0.42 yuan and a proposed interim cash dividend of 0.204 HKD per share, resulting in a payout ratio of 45.0% [1]. - Gross margin improved by 0.2 percentage points to 41.5%, while operating margin and net profit margin decreased by 0.7 and 0.3 percentage points to 19.9% and 15.0%, respectively [1][2]. - Revenue from the main brand (offline channels) grew by approximately 10-15%, while e-commerce revenue surged by 35-40% [1]. Revenue Breakdown - Adult and children's clothing revenue increased by 8.2% and 10.0%, respectively, with online sales growing by 45.0% and offline sales remaining flat [1][2]. - The revenue contribution from adult clothing, children's clothing, and other categories was 73.2%, 21.6%, and 5.2%, respectively, with significant growth in adult footwear and children's footwear [1][2]. Channel Performance - Online and offline revenue contributions were 31.8% and 68.2%, respectively, with online sales growing by 45.0% and offline sales remaining stable [2]. - As of June 2025, the company operated 5,669 stores in mainland China and 1,357 overseas, with a slight decrease in the number of stores compared to the beginning of the year [2]. Inventory and Cash Flow - Inventory as of June 2025 was 1.89 billion yuan, a decrease of 10.5% from the beginning of the year, while accounts receivable increased by 7.2% to 4.66 billion yuan [3]. - Operating net cash flow for H1 2025 was 0.52 billion yuan, reflecting a significant increase of 227.2% year-on-year, driven by profit growth and reduced inventory [3]. Strategic Developments - The company is focusing on enhancing its brand competitiveness and expanding into new sports categories, including fitness and yoga [3]. - The launch of new products and the establishment of super stores are part of the strategy to strengthen brand image and improve customer experience [3].

Core Viewpoint - The company reported a steady growth in revenue and net profit for the first half of 2025, indicating a positive performance despite challenges in the retail environment [3][4]. Financial Performance - In the first half of 2025, the company achieved a revenue of 5.7 billion yuan, a year-on-year increase of 11.0%, and a net profit attributable to shareholders of 0.86 billion yuan, up 8.6% year-on-year [3]. - The earnings per share (EPS) stood at 0.42 yuan, with a proposed interim cash dividend of 0.204 HKD per share, resulting in a payout ratio of 45.0% [3]. - The gross profit margin improved by 0.2 percentage points to 41.5%, while the operating profit margin and net profit margin saw slight declines [3][6]. Revenue Breakdown - Adult and children's clothing revenue grew by 8.2% and 10.0% respectively, with online sales increasing by 45.0% while offline sales remained flat [4]. - The revenue contribution from adult clothing, children's clothing, and other categories was 73.2%, 21.6%, and 5.2% respectively, with significant growth in the other category [4]. - Online sales accounted for 31.8% of total revenue, while offline sales made up 68.2% [4]. Channel and Store Expansion - As of June 2025, the company operated 5,669 stores in mainland China and 1,357 overseas, with a slight decrease in the number of stores compared to the beginning of the year [5]. - The company has also opened 49 super stores, including 4 dedicated to children's products [5]. Cost Management and Cash Flow - The company managed to reduce inventory by 10.5% from the beginning of the year, while the operating net cash flow increased significantly by 227.2% year-on-year [6][7]. - The period expense ratio slightly increased to 24.1%, with advertising and market promotion expenses accounting for 10.1% of revenue [7]. Brand Development and Market Positioning - The company has been focusing on enhancing its brand competitiveness by launching new products and entering emerging sports markets [8]. - In July 2025, the company became a global partner of the World Swimming Federation, which is expected to enhance its global brand influence [8].

Core Insights - 361 Degrees reported a revenue increase of 11% year-on-year to 5.705 billion yuan and a net profit of 858 million yuan, marking an 8.6% increase, both reaching historical highs [2] - Despite the positive financial results, the growth rate has slowed compared to previous years, leading to a more than 10% drop in stock price following the earnings announcement [2] Revenue Breakdown - The company achieved its first annual revenue exceeding 10 billion yuan last year, reaching 10.07 billion yuan, joining the "100 billion club" of domestic sports brands alongside Anta and Li Ning [2] - The children's business has emerged as a significant growth driver, with revenue reaching 1.26 billion yuan in the first half of the year, a year-on-year increase of 11.4%, accounting for 22.1% of total revenue [3] Product and Market Strategy - 361 Degrees has developed a dual-brand matrix with 361 Degrees as the main brand and 361 Degrees Kids as a key growth segment, covering various sports categories [3] - The children's footwear segment saw a remarkable revenue increase of 27.8%, supported by favorable policies promoting sports in education [3] Research and Development - The company holds 870 patents and employs 832 technical staff, with a focus on children's and accessory product development [4] - R&D expenditure accounted for 2.8% of total revenue in the first half of the year, with plans to increase this to 3%-4% [4] E-commerce and Sales Channels - E-commerce sales reached 1.817 billion yuan, representing 31.8% of total revenue and a 45% year-on-year growth, becoming a core growth driver [5] - The company operates 5,669 brand stores, with 76% located in lower-tier cities, and has expanded its international presence with 1,357 overseas sales points [5] Competitive Landscape - 361 Degrees is positioned in the high-cost-performance segment, contrasting with competitors like Anta and Li Ning, which are pursuing high-end and trendy market strategies [7] - The company's gross margin of 41.5% is lower than Anta's projected 62% and Li Ning's 50%, raising concerns about its long-term profitability if it continues to rely on the cost-performance model [7]

Investment Rating - The report maintains a "Buy" rating for the company 361 Degrees (1361.HK) [1] Core Views - The company achieved steady growth in the first half of 2025, with revenue and net profit attributable to shareholders increasing by 11.0% and 8.6% year-on-year, respectively [3] - The company is focusing on enhancing its core competitiveness and expanding its new retail formats, including the successful rollout of super premium stores [9] - The online sales channel has shown rapid growth, while the offline channel is innovating with new retail formats to strengthen brand image [9] Financial Performance - For the first half of 2025, the company reported revenue of 5.7 billion HKD and a net profit of 0.86 billion HKD, with earnings per share (EPS) of 0.42 HKD [3] - The gross profit margin improved by 0.2 percentage points to 41.5%, while the operating profit margin and net profit margin decreased by 0.7 and 0.3 percentage points to 19.9% and 15.0%, respectively [3][7] - The company plans to distribute an interim cash dividend of 0.204 HKD per share, with a payout ratio of 45.0% [3] Revenue Breakdown - Revenue from the adult and children's apparel segments grew by 8.2% and 10.0% year-on-year, respectively, with online sales increasing by 45.0% while offline sales remained flat [5] - The company’s main brand and children's brand saw offline sales growth of 10-15% and approximately 10%, respectively, while e-commerce sales grew by 35-40% [4][12] Store Expansion - As of June 2025, the company operated 5,669 stores in mainland China and 1,357 overseas, with a total of 49 super premium stores opened [6] Cash Flow and Inventory - The company reported a significant increase in operating cash flow, which rose by 227.2% year-on-year to 0.52 billion HKD, primarily due to profit growth and a reduction in inventory [8] - Inventory as of June 2025 was 1.89 billion HKD, a decrease of 10.5% from the beginning of the year [8] Future Outlook - The company expects continued revenue growth, with projected earnings per share of 0.64, 0.72, and 0.81 HKD for 2025, 2026, and 2027, respectively [9][10] - The current stock price corresponds to a price-to-earnings (P/E) ratio of 8 times for 2025, 7 times for 2026, and 6 times for 2027 [9]

Investment Rating - The report maintains a "Buy" rating for the company, with a target price based on the last closing price of 4.82 HKD [1][10]. Core Insights - The company achieved a revenue of 10.07 billion HKD in 2024, representing a year-on-year growth of 19.6%, and a net profit of 1.15 billion HKD, also up by 19.5% [4][10]. - The company is expected to benefit from the expansion of its "super premium" stores, which are anticipated to contribute additional revenue in 2025 [1][10]. - The company is positioned as the fourth largest domestic sports brand in China, focusing on technology-driven professional sports products and enhancing its competitive edge in children's apparel [8][10]. Revenue Breakdown - Adult footwear and apparel revenue grew by 22% and 15% respectively, reaching 4.3 billion and 3.1 billion HKD, driven by new product launches and sponsorships [5]. - Children's footwear and apparel revenue increased by 18% and 23% respectively, totaling 1.1 billion and 1.2 billion HKD, capitalizing on diverse consumer needs [5]. - Offline revenue rose by 23% to 7.3 billion HKD, with a total of 8,298 stores by the end of 2024, while e-commerce revenue grew by 12% to 2.6 billion HKD [5]. Store Expansion and Operations - The company is actively exploring new store formats, with plans to open 100 "super premium" stores in 2025, enhancing the shopping experience [6][10]. - Currently, five stores are operational, with plans to increase to ten by the end of March and approximately fifty by June [6]. Financial Metrics and Forecast - The gross profit margin improved by 0.4 percentage points to 41.5%, while the net profit margin remained stable at 11.4% [7]. - The company forecasts a sales growth of 10%-15% in 2025, with a gross margin expected to be between 40-42% [7]. - Projected net profits for 2025, 2026, and 2027 are 1.32 billion, 1.50 billion, and 1.65 billion HKD respectively, with corresponding EPS of 0.64, 0.72, and 0.80 HKD [11][10].