Zhongjin Securities released a research report stating that it maintains a "outperform" rating for 361 degrees (01361), with a 2024/25 EPS forecast of 0.52/0.6 yuan unchanged. Considering the central valuation of the industry has fallen somewhat, the target price has been lowered by 13% to HKD 5.27. The company's main brand offline retail sales increased by about 10% year-on-year in 2Q24, and the children's clothing line of 361 degrees had sales growth of 10-20% in the middle section, while e-commerce platform sales increased 30-35% year-on-year.

CICC's main points are as follows:

The main brand and children's clothing of 361 degrees continue to show fast growth in offline sales.

Although there were unfavorable weather conditions and other factors in the quarter, the main brand of 361 degrees had an offline retail sales growth of about 10% year-on-year in 2Q24. The company is driving the brand with a professional sports approach and the professional attributes of its product matrix, such as running and basketball, are continuously increasing. The children's clothing line of 361 degrees is positioned as a "young sports expert" to meet the different needs of young sports enthusiasts, and the professional functionality of its products is continually improving, with offline retail sales growth of 10-20% in 2Q24. As competition in the industry remains fierce, the average offline retail discount for 361 degrees main brand and children's clothing was around 71% during the quarter, slightly better than the 70% discount in 1Q24, but still not back to the pre-epidemic discount level of 75%. As of the end of June, the company's inventory-to-sales ratio remained stable at 4.5-5x, maintaining a relatively healthy level.

Online sales continued to perform well, and growth accelerated month-on-month. In 2Q24, the company's e-commerce platform sales increased by 30-35% year-on-year under a relatively high base (about 30% year-on-year growth in online sales in 2Q23), with an accelerated month-on-month growth. The company insists on expanding the "interest e-commerce" market and promoting the integration and marketing of professional products represented by running and basketball online, efficiently linking the supply chain to improve rapid feedback efficiency. During the online promotion period of 618, Feiran 3 was in high demand for supplementary orders.

The brand and product strength continue to improve, and the 2025 spring ordering conference ended successfully. Thanks to the continuous improvement of the functional technology of the company's running and basketball product matrix, as well as the continuous increase in marketing resources such as signing sports stars and hosting its own events, the brand and product strength of 361 degrees continue to improve. The good performance of terminal sales has also driven the enthusiasm of dealers to place orders. The company's overall performance at the 2025 spring ordering conference was good, with an average price increase of over 7% compared to the same period last year, better than in the past, mainly driven by the improvement of the product structure. 361 degrees main brand continues to deeply cultivate the mass market, with more prominent cost performance advantages. Currently, the main brand store efficiency is about 2 million yuan per year. The management stated in a conference call that it will continue to pay attention to store efficiency and product sell-through rate performance in the future.

The functional technology of the company's running and basketball product matrix and the continued increase in marketing resources such as signing sports stars and hosting its own events have driven the continuous improvement of the brand and product strength of 361 degrees, with the 2025 spring ordering conference ending successfully.

The company's brand and product strength continue to improve thanks to the continuous improvement of the functional technology of its running and basketball product matrix and the continuous increase in marketing resources such as signing sports stars and hosting its own events. The good performance of terminal sales has also driven the enthusiasm of dealers to place orders. The company's overall performance at the 2025 spring ordering conference was good, with an average price increase of over 7% compared to the same period last year, better than in the past, mainly driven by the improvement of the product structure. 361 degrees main brand continues to deeply cultivate the mass market, with more prominent cost performance advantages. Currently, the main brand store efficiency is about 2 million yuan per year. The management stated in a conference call that it will continue to pay attention to store efficiency and product sell-through rate performance in the future.

Risk

Industry competition intensifies, the terminal retail environment is not as expected, and raw material prices fluctuate.