Based on the continued improvement in operating conditions in 2023, 361 announced the resumption of dividends, with a dividend distribution of 20.4 HK cents per common share, with a dividend payout ratio of 40.2% for the whole year.
The Zhitong Finance App learned that Anxin International released a research report stating that it maintains a 361 degree (01361) “buy” rating, and based on comprehensive considerations, predicts EPS of 2024/2025/2026 at 0.54/0.62/0.7, with a target price of HK$6.9. After the company was included in the Hong Kong Stock Connect last year, market attention was further increased, which also helped increase trading volume and liquidity. The brand's popularity increased after the Asian Games. Management explained that in the future, the company will also sponsor more large-scale events to help raise the brand's voice.
Anxin International's main views are as follows:
The recovery in consumer sports products led to sales growth, and e-commerce and children's clothing showed strong performance
As the consumer market continues to pick up, the boom in the sports industry continues to rise, driving an increase in sales of consumer sports products. In 2023, 361 recorded revenue of 8.423 billion yuan, up 21.0% year on year, of which children's clothing revenue was 1,958 billion yuan, up 35.7% year on year, accounting for 23.2% of revenue; e-commerce revenue was 2,326 billion yuan, up 38.0% year on year, accounting for 27.6% of revenue. The company's children's clothing business has a first-mover advantage and has continued to grow rapidly in recent years. The company's e-commerce business uses a full direct management model, exclusively for online products, and is separated from offline products to effectively prevent channel smuggling.
In terms of store network, as of the end of 2023, the number of large clothes/children's clothing sales outlets was 6994/2545, a net increase of 254/257 over the previous year. It is expected that the pace of net store opening will be maintained in the future; the area of a single large clothes/children's clothing store is 138/103m2, a year-on-year increase of 9/11m, respectively2. Gross margin increased 0.6 pp to 41.1% year over year, with gross margin of footwear and children's clothing rising 1.2/0.9 pp to 42.4%/41.8% year on year, respectively. Influenced by the increase in revenue and gross margin, net profit margin to mother increased 0.7pp to 11.4% year over year, and net profit to mother also increased 28.7% year over year to 961 million yuan, exceeding market expectations. Furthermore, based on the continued improvement in operating conditions in 2023, the company announced the resumption of dividends, paying HK20.4 cents per common share, with a dividend payout ratio of 40.2% for the whole year.
Major sporting events such as the Asian Games help the brand expand its influence
As an official partner of four consecutive Asian Games, 361 degrees and the Asian Games have formed a deep bond. The 2023 Hangzhou Asian Games were successfully held, and 361 degrees of discussion remained high. It ranked third in the Asian Games sponsor influence ranking, and ranked first among sports brands. The brand's volume was increased, which also contributed to product exposure and sales. Furthermore, the company continues to expand the sports market through its own events such as the “10KM Racing Series”, “Hit the Ground”, and “Women's Fitness Bureau”, etc., reaching out to sports participants in cities at all levels, and establishing a high-quality reputation for the brand. At the same time, the company launched innovative products through celebrity ambassadors, IP linkages, etc., to attract the attention of young consumers and continue to enrich the brand's youthful expression.
Risk warning: macroeconomic downturn, inventory backlog; industry competition intensifies; new product sales fall short of expectations.