Incidents:
361 March 2024 announcement: In 2023, the company achieved total revenue of 8.42 billion yuan, +21.0% year on year, net profit of 960 million yuan, +28.7% year on year, net interest rate of 11.4%, +0.7 pct compared with the same period last year, gross margin of 41.1%, +0.6 pct compared with the same period last year, and proposed a final dividend of 13.9 HK cents per common share.
Investment highlights:
Revenue and profit growth in 2023 exceeded our expectations, and the e-commerce business grew at an impressive rate. In 2023, the company achieved total revenue of 8.42 billion yuan, +21.0% year on year, net profit of 960 million yuan, +28.7% year on year, net interest rate of 11.4%, +0.7 pct compared to the same period last year, gross margin of 41.1%, and +0.6 pct compared to the same period last year. Looking at the business split, 1) By category: footwear revenue of 3.51 billion yuan, gross profit margin of 42.4%, +1.2pct compared with the same period last year, annual footwear sales of 28.39 million pairs, +19.4%, average price 123.6 yuan, +3.0% year over year; clothing revenue 2.69 billion yuan, +9.8% year on year, gross profit margin 40.5%, compared with -1.1 pct. Annual clothing sales revenue of 31.16 million pieces, +9.4% year on year, average price 86.3 yuan, +0.5% year on year; accessories revenue Compared with +43.0%, gross profit margin of 34.7%, compared with -1.3 pct in the same period last year, sold 8.84 million accessories, +63.4%, average price 15.5 yuan, -12.4%; 361 children earned 1.96 billion yuan, +35.7%, gross profit margin 41.8%, +0.9pct compared to the same period last year, children sold 23.15 million pieces/pair throughout the year, +31.0%, average price 84.6 yuan, +3.7% year on year; other revenue was 130 million yuan, +8.0% compared to the same period last year, gross profit margin of 14.6% year Sync +12.1pct. 2) Channel division: The company's e-commerce business revenue was 2.33 billion yuan, accounting for 27.6%, up 38% year on year, and offline business revenue was 6.1 billion yuan, accounting for 72.4%. In 2023, the company's adult footwear, clothing and children's categories achieved a sharp increase in volume and price. We are optimistic that the company's categories will continue to iterate in 2024 and continue to explore growth potential.
The overall operation of the company is steady, and domestic and foreign stores are actively expanding. 1) Expenses: In 2023, the company's advertising and expenses accounted for 12.7%, +1.3 pct compared to the same period last year, and R&D expenses accounted for 3.7%. Compared with the same period last year, -0.1 pct, employee costs accounted for 9.2%, and -0.6 pct compared to the same period last year. 2) Inventory: As of the end of 2023, inventory was 1.35 billion yuan, +14.2% year over year. The number of inventory turnover days was 93 days, +2 days compared to the same period last year. 3) In terms of stores: As of the end of 2023, the number of 361 stores in mainland China was 5,734, compared with +254 in the same period last year, 2,545 361 children's stores, +257 compared to the same period last year, 361 international sales outlets, and +68 compared to the same period last year. The pace of store expansion was positive.
Profit forecast and investment rating: Considering the rapid growth of the company's online business in 2023 and the potential expansion of the children's clothing business in the future, we adjusted the company's profit forecast. The main revenue for 2024-2026 is RMB 99.2/114.7/13.02 billion yuan, +17.5%/13.5% YoY; net profit to mother is RMB 11.4/13.4/1.55 billion yuan, +18.9%/+17.4%/+15.2%, corresponding to the closing price of HK$4.58 on March 13, 2024 The 2024-2026 PE valuation is 7.5/6.4/5.6X. Over the long term, we are optimistic that the company's product strength will increase, channel expansion, and rapid online business growth. The company's brand strength will continue to improve and maintain a “buy” rating.
Risk warning: risks caused by macroeconomic fluctuations; risk of industry competition; risk of changing consumer preferences; risk of product launch falling short of expectations; supply chain risks; other risks, etc.