Core Viewpoint - The company reported a solid performance in H1 2025, with revenue growth of 11% and a net profit increase of 8.6%, while also raising its dividend payout ratio to enhance shareholder returns [1][4]. Group 1: Financial Performance - In H1 2025, the company's revenue reached 57 billion, with a gross margin of 41.5%, and a net profit of 8.6 billion, resulting in a net profit margin of 15% [1]. - The company declared a dividend of 20.4 Hong Kong cents per share, increasing the payout ratio from 40.3% in H1 2024 to 45% [1]. - The company expects revenue growth of 11.4% and net profit growth of 9.8% for the full year 2025 [4]. Group 2: Adult Business Segment - The adult footwear and apparel segment saw revenue growth of 8.2% to 41.8 billion, with footwear sales increasing by 12.8% to 25.7 billion and apparel sales growing by 1.6% to 16 billion [1][2]. - The company has enhanced its product offerings in the running and basketball categories, with a focus on brand strength through sponsorships and product innovation [2]. - The number of adult stores decreased by 71 to 5,669, while the average store size increased by 7 square meters to 156 square meters [2]. Group 3: Children's Business Segment - The children's business segment achieved revenue of 12.6 billion, reflecting a year-on-year growth of 11.4%, accounting for 22.1% of total revenue [3]. - The number of children's stores decreased by 56 to 2,494, but the average store size increased by 5 square meters to 117 square meters [3]. Group 4: E-commerce Business Segment - E-commerce revenue surged by 45% to 18.2 billion, representing 31.8% of total revenue, with 85% of e-commerce sales coming from exclusive products [4]. - The company improved its cash flow, with net cash from operating activities increasing by 227% to 5.24 billion [4]. - Inventory levels rose by 29% to 18.9 billion, with inventory turnover days extending by 24 days to 109 days, indicating support for e-commerce growth and replenishment needs [4].

Investment Rating - The investment rating for the company is "Buy" [5] Core Views - The company achieved a steady revenue and profit growth in H1 2025, with revenue increasing by 11% year-on-year to 5.7 billion yuan and net profit rising by 8.6% to 860 million yuan [1][9] - The company is focusing on enhancing shareholder returns, as evidenced by an increase in the dividend payout ratio to 45% from 40.3% in H1 2024 [1] - The company is expected to maintain a revenue growth of 11.4% and a net profit growth of 9.8% for the full year 2025 [4][9] Summary by Sections Adult Business - The adult segment's revenue grew by 8.2% year-on-year to 4.18 billion yuan, with footwear and apparel revenues increasing by 12.8% and 1.6% respectively [1][2] - The company has optimized its store structure, reducing the number of adult stores by 71 to 5,669 while increasing the average store size by 7 square meters to 156 square meters [2] Children's Business - The children's segment reported a revenue of 1.26 billion yuan, reflecting a year-on-year growth of 11.4%, accounting for 22.1% of total revenue [3] - The number of children's stores decreased by 56 to 2,494, but the average store size increased by 5 square meters to 117 square meters [3] E-commerce Business - E-commerce revenue surged by 45% year-on-year to 1.82 billion yuan, representing 31.8% of total revenue, with 85% of sales coming from e-commerce exclusive products [3] Financial Performance - As of the end of H1 2025, accounts receivable increased by 4% to 4.66 billion yuan, while inventory rose by 29% to 1.89 billion yuan, indicating a focus on supporting e-commerce and replenishing offline stock [4] - The net cash flow from operating activities saw a significant increase of 227% year-on-year to 524 million yuan, reflecting improved operational quality [4]

Core Viewpoint - The traditional retail model in the sports consumption sector is facing multiple challenges, including product homogenization and low store efficiency, prompting the launch of a new retail format by 361° called "361° Super Product" to create a one-stop shopping experience for consumers [1][3]. Group 1: Industry Challenges - The sports consumption market is expanding, but traditional sports stores struggle to meet the diverse needs of families and all-scenario consumption due to space and product category limitations [3]. - There is a growing contradiction between inventory turnover efficiency and the demand for upgraded consumer experiences in the industry [3]. Group 2: 361° Super Product Innovation - The "361° Super Product" aims to upgrade the traditional "shelf display" to a "scene-based living space" through a four-dimensional approach: scene, category, efficiency, and emotion [3]. - The average store size of 800 square meters accommodates various sports scenarios, allowing consumers to intuitively connect products with their lifestyles [3][7]. Group 3: Product Range and Shopping Experience - The product range breaks boundaries, covering seasonal items and needs for all age groups, including new categories like tennis [7]. - The store features a large number of SKUs, with specific categories for running shoes and casual shoes, effectively meeting diverse consumer needs [7]. - Digital tools like self-service scanning and electronic price tags streamline the shopping process, allowing efficient operation with fewer staff and enhancing the "buy and go" experience [7]. Group 4: Market Expansion and Capital Confidence - Since its launch in December 2024, 361° Super Product has rapidly expanded, opening 10 stores by March 2025, with projections to exceed 100 stores by the end of 2025 [8]. - The company anticipates that each store could generate nearly 10 million in annual revenue, potentially becoming a significant growth driver for the group [8]. - The 361° Group's revenue is expected to surpass 10 billion in 2024, with the Super Product line contributing to retail growth by capturing market opportunities for high-quality, cost-effective sports products [8][9]. Group 5: Strategic Shift in Consumer Perception - The introduction of 361° Super Product shifts consumer perception from "functional consumption" to "scene-based living," marking a strategic elevation in the sports retail sector [8][9]. - This model not only addresses industry pain points but also opens a new avenue for mass sports consumption, potentially setting a benchmark for brand transformation and redefining growth boundaries in the industry [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].