Incident: The company recently released 24Q1 operating data. Offline channel retail sales of 361 degree main brands/children's clothing also increased by double/ 20%-25%; e-commerce channel traffic increased by 20%-25% year-on-year, showing impressive performance.
The product matrix continues to be upgraded, and competition support helps the brand continue to amplify its volume. Over the past 24 years, the product side has continued to gain momentum. 1) In the field of running: launching a new color scheme for professional marathon racing shoes “Flying Fire 3”; launching the “Wind Family” series, which empowers the needs of various usage scenarios such as professional racing and daily training with the latest material technology; and launching the “Fast 3 Pro” racing shoes to position field racing to provide full support for physical examiners. 2) Basketball field: Sign Kentavius Cardville-Pop to give full play to the influence of the spokesperson in the basketball field and enhance brand awareness; 3) Comprehensive training field: continue to improve the sports category layout and launch the “New Skin 4.0” series for women's professional sports, using a new, elegant and deep Chinese low-saturation aesthetic color scheme to provide external protection of softness and toughness.
In terms of events, 361 Degrees participated in the April Qingdao Marathon as an honorary partner of the 2024 Qingdao Marathon, further strengthening the brand's professional image in the field of running. Among them, the “Feibiao 2” and “Feibiao Future 1.5” series running shoes helped Li Zicheng, Guan Yousheng and many other 361 degree running spokespersons and operators to reach the podium; in addition, 361 Degrees became the official sportswear supplier of the World Swimming Federation, further demonstrating the brand's product quality and professionalism, and raising the brand's voice in the international market.
Plans to open offline stores have not changed, and e-commerce is growing at an impressive rate. Big goods and children's clothing maintain their pace of opening stores, and are expected to open 100 to 200 stores throughout the year; e-commerce channels will continue to dig deeper into the online customer base through activities such as “No Break for the New Year”, “NBA All-Star Weekend”, “38 Big Promotions”, and “Tmall Brand Annual Membership Day” to stimulate the company's e-commerce potential. With online and offline products and e-commerce exclusive products, the e-commerce channel will continue to strengthen its differentiated online competitive advantage.
Profit forecast and valuation: The outstanding performance of 24Q1, children's clothing and e-commerce continued to grow beautifully, laying a good start for year-round growth. Combined with the performance of the order fair, we are firmly optimistic that the company's sales target of breaking 10 billion dollars in 24 years will be achieved. Through rich product matrices and structural optimization, channel upgrades, and increased brand volume with the support of the competition, the company's positioning in terms of quality and price ratio has gradually been recognized by consumers. We maintain the company's profit forecast. We expect the company's net profit to be 11.6/13.5/1.56 billion yuan in 2024/25/26, and the current stock price corresponds to 7/6/6 times PE; we gave the company 10 times PE for 24 years, with a corresponding target price of HK$6.12, maintaining a “buy” rating.
Risk warning: Consumption recovery falls short of expectations, market competition intensifies, product acceptance falls short of expectations, store opening progress falls short of expectations, inventory risk, etc.