CICC: Steady growth in performance, significant improvement in cash flow

2025 performance better than our expectations

The company announced its 2025 performance: revenue increased by 11% year-over-year to RMB 11.146 billion, and net profit attributable to shareholders increased by 14% year-over-year to RMB 1.309 billion. The performance was better than our expectations, mainly due to good cost control. The company declared a final dividend of 11.3 Hong Kong cents per share, corresponding to a full-year payout ratio of approximately 45%.

Revenue showed steady growth, with outstanding performance from premium stores and online channels.The main brand of 361 Degrees reported a 9% year-on-year increase in revenue to RMB 8.052 billion in 2025, with footwear and apparel sales increasing by 8% and 11%, respectively. 361 Degrees Kids' revenue grew 10% year-on-year to RMB 2.583 billion in 2025, with footwear and apparel sales up 29% and down 8%, respectively. By the end of 2025, the company had opened 127 premium stores, with expectations to exceed 200 premium stores by 2026. Currently, over 80% of these premium stores are profitable. Online, e-commerce channel revenue increased 26% year-on-year to RMB 3.286 billion in 2025, with its revenue share rising to 30% (vs. 26% in 2024).

Cost control was effective in 2025, with continued investment in sporting events expected in 2026.In 2025, the company's gross margin remained flat at 41.5% year-on-year, with the main brand of 361 Degrees seeing a 2.0ppt increase in gross margin, while 361 Degrees Kids’ gross margin decreased by 3.7ppt. The company’s selling expenses ratio dropped 1.8ppt to 20.2%; management expenses ratio rose 0.8ppt to 7.7%, mainly due to donation expenditures; profit increased 14% year-on-year to RMB 1.309 billion. In 2026, the company will continue to invest in sporting event resources, becoming an official partner of the Asian Games for the fifth consecutive time and signing with the WTT World Table Tennis League to further strengthen brand building.

Operational quality improved, with a significant rise in operating cash flow.Thanks to the company’s effective accounts receivable management, days sales outstanding stood stable at 149 days in 2025. Inventory levels in 2025 decreased by RMB 0.4 billion compared to 2024. Operating cash flow surged 1067% year-on-year to RMB 810 million in 2025 (vs. RMB 70 million in 2024).

Development trends

Management disclosed that order bookings for the first three quarters of 2025 were excellent, with order growth primarily driven by volume increases, and expressed optimism about full-year operational performance.

Profit Forecast and Valuation

Considering the company's excellent cost control, we raised our EPS forecasts for 2026/27 by 6%/7% to RMB 0.72/0.79, with the current stock price trading at 7/6 times 2026/27 P/E. We maintain an outperform industry rating. Accordingly, we raised the target price by 5% to HKD 7.08, corresponding to 9 times 2026 P/E, offering 24% upside potential from the current stock price.

Risk

Intensified industry competition, weaker-than-expected retail environment, and slower-than-expected store openings.

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