【行业研究报告】361度-Resilient outlook backed by rising popularity

14Mar2024
CMBInternationalGlobalMarkets|EquityResearch|CompanyUpdate
361Degrees(1361HK)
Resilientoutlookbackedbyrisingpopularity
361Degrees’sFY23resultwasroughlyinlinebutwearedelightedtoseeits
dividendpayoutratioresumedto40%.GoingforwardinFY24E,wearestill
confident,thanksto:1)itswholesalebusinessnature(supportedby80%+sell
throughrate),2)resilientretailsalesgrowth(20%+inJan-Feb2024)and3)
solidproductandbrandingupgradesaroundrunningandbasketball.
Wedoappreciate361Degrees’swholesalebusinessnature,because
thegrowthcouldbemorecertain.Accordingtothemanagement,the
thegrowthcouldbemorecertain.Accordingtothemanagement,the
tradefairsalesgrowthwasroughlybetween15%to20%for1Q/2Q/3Q24E,
andtogetherwiththeimpressivesellthroughratefor1Q/2Q/3Q23,at80%+,
wearereasonablyconfidenton18%/22%sales/NPatt.growthinFY24E.
Wearestillquiteconfidentonitsretailendperformance,basedon
manyaspectsofthebusiness.Wedoseelotsofpositivesin361
Degrees,inorderforustostayconfidentinFY24Eamidsuchaweakmacro
environment.Intermsofproducts,361Degrees’runningandbasketball
productssalesgrowthwasasfastas20%+and40%+inFY23,whichare
alldrivenbythesolidupgradesinproductquality,inourview.Wedoexpect
themomentumtocontinue.Itisalsoforeseeablethatanewseriesof
basketballshoesaroundNikolaJokićwillbelaunched(perhapsinFY25E).
Moreover,theCompanyisalsoexpandingitsproductcategories,suchas:
1)thefemalefitnesswear,2)skiboardseries,3)badmintonandeven4)
footballproducts,etc.Intermsofmarketing,361Degreesintroducedanew
self-ownedIPcalled“Women’sFitnessGym”in2023,anditshould
generatemorepositiveinteractionwithcustomersandfans.Intermsof
channel,e-commercesalesremainedhighlyrobust(performanceduringthe
InternationalWomenDaywasstrongandtheinternalguidanceforFY24E
hasbeenraisedforafewtimes,supportedbydecentnumbersinJan-Feb
2024).Wealsothinkthatofflinebusinessisoneofthekeyfocusfor
managementinFY24E.Whilewearecomfortablewiththerapidstore
expansionsinFY22-23andthesurgein9thgenerationstoremix,thesales
perstoregrowth(orSSSG)isstillhighlycritical.Therefore,wedoconcur
withmanagement’splantoimproveitssalesproductivitythroughvarious
areaslikeimprovingtheitemsperticketandmembersmanagement.
MaintainBUYwithTPofHK$6.25.WerevisedupFY24E/25Enetprofit
by3.4%/3.1%tofactorin:1)solidkidsande-commercesales,2)beatin
storeexpansionsand3)less-than-expectedstaffcosts.OurnewTPis
basedon10xFY24EP/E.Westillthinkcurrentvaluationisfairlyattractive,
at8xFY24EP/E(25%discountstoindustryaverage),plusayieldof4.5%.