CICC: Maintaining a 361 degree (01361) “outperforming the industry” rating target price of HK$5.62

The Zhitong Finance App learned that CICC released a research report stating that it will maintain the 361 degree (01361) 2025/26 EPS forecast of 0.64/0.72 unchanged. The current stock price corresponds to 6.3/5.5 times the 2025/26 price-earnings ratio, and keeps the outperforming industry rating and target price of HK$5.62 unchanged, corresponding to 8 times the 2025 price-earnings ratio. The company announced its business results for the first quarter. Offline retail sales of 361 degree brands increased 10-15% year over year, offline retail sales of 361 degree children's clothing increased 10-15% year over year, and retail sales of 361 degree e-commerce platform increased 35-40% year over year.

CICC's main views are as follows:

Actively explore emerging channel forms, and terminal sales grow healthily

The 361 degree main brand focuses on the field of popular professional sports, and offline retail sales increased 10-15% year-on-year in 1Q25. On the channel side, the company continues to improve the operating efficiency of terminal stores and develop supermarket stores with an area of 800 square meters or more (currently there are 10). The aim is to establish a sports goods optional model with outstanding cost performance. The performance of operating indicators such as connection rate is better than regular stores. 361 degree children's clothing provides high-quality solutions for children and young people's all-scene sports life. 1Q25 offline retail sales increased 10-15% year-on-year. In terms of discounts, the 361 degree offline retail discount during the season was about 30% off, which was basically the same as the previous year. By the end of March, the company's omni-channel inventory sales ratio was 4.5-5x, maintaining a healthy level.

Differentiated online and offline operations to give full play to the advantages of exclusive products

Retail sales of the 361-degree e-commerce platform in 1Q25 increased 35-40% year over year (1Q24 increased 20-25% year over year). The company adheres to the differentiation of online and offline products, giving full play to the advantages of online exclusive products. In 2024, about 84% of sales will be contributed by exclusive products. The company quickly responded to consumer trends through e-commerce channels, and achieved monthly updates in categories such as running and basketball in January-March. Around the Spring Festival in the first quarter, the company launched limited-edition color products for the Year of the Snake, which were recognized by consumers.

Overseas business accounts for a relatively low share, focusing on developing regions such as Southeast Asia and the Belt and Road

By the end of 2024, there were 1,365 overseas retail outlets at 361 degrees, mainly distributed in Europe, America, Southeast Asia and the Belt and Road region. Among them, the company had nearly 100 retail stores in the US, with a relatively low revenue contribution (the company's overseas revenue of 190 million yuan in 2024, contributing 1.8% of the company's overall revenue). At the same time, compared to some overseas brands, 361 degree products have a cost performance advantage. The management plans to focus on developing Southeast Asia and the Belt and Road region, which are similar in culture and aesthetics to Chinese people in the future.

Risk warning: The terminal retail environment falls short of expectations, industry competition intensifies, and raw material prices fluctuate.