GF Securities: Deepening Mass Market Focus, Super Stores + Kids' Business Drive New Growth

Core Viewpoint:

The company targets the mass market with a strong price-to-quality ratio and achieved industry-leading growth from 2019 to 2024.361 Degrees was founded in 2003 and listed on the Hong Kong Stock Exchange in 2009. Targeting the mass market, it embodies the spirit of 'One More Degree of Passion,' adhering to a brand positioning of 'Professionalism, Youthfulness, and Internationalization.' It is the fourth-largest sportswear brand in China. According to financial reports, from 2019 to 2024, the compound annual growth rate of the company’s revenue/net profit was 12.24%/21.61%. In H1 2025, the company generated revenue/parent company net profit of RMB 5.705 billion/RMB 858 million, representing year-on-year growth of 10.96%/8.61%.

The prospects for China's athletic footwear and apparel market are broad, with domestic brands continuously gaining market share.China’s athletic footwear and apparel market has significant potential, leading growth rates in the apparel segment. In recent years, recognition of domestic athletic footwear and apparel brands has steadily increased, driving a continuous rise in domestic brand market share. The company has a clear positioning and offers good value for money; on the channel side, it has introduced a new Super Store format while e-commerce continues to grow rapidly; the proportion of children's business is also increasing, creating potential for new growth curves.1The brand targets the mass market and delivers high cost-performance. On the product side, the company focuses on the mass market, consistently investing in R&D and innovation to enhance specialization. On the channel side, it concentrates on a distribution model with stores primarily covering lower-tier cities while actively introducing the new Super Store format. On the marketing side, it leverages celebrity endorsements, self-owned IP events, and major event sponsorships to continuously boost brand influence.2The company operates four key divisions: sports, children’s wear, e-commerce, and overseas operations. Aside from its core brand business, both its children’s wear and e-commerce segments are experiencing rapid growth, potentially creating new growth opportunities.

Earnings forecast and investment recommendations. The company’s projected EPS for 2025-2027 is 0.61, 0.68, and 0.75 RMB per share, respectively. Based on comparable company valuations and considering the company’s smaller revenue scale compared to peers, we assign a 10x PE ratio for 2026. Using the December 2025 exchange rate of CNY/HKD at 0.9078, this corresponds to a fair value of 7.53 HKD per share. For the first coverage, we assign a 'Buy' rating.

Risk warnings. Risks include a decline in the global macroeconomic environment, supply chain disruptions, and rising labor costs.

Earnings Forecast:*Unless otherwise specified, all monetary units in this article are in RMB.

(1) The company is a mass-market athletic apparel brand that focuses on its core business and is experiencing rapid development.

According to the official website, 361 Degrees (Stock Code: 01361.HK), established in 2003 and listed on the Hong Kong Stock Exchange in 2009, is one of China’s leading comprehensive sports goods enterprises, targeting the mass market with “One Degree More of Passion” as its core spirit. The brand adheres to the positioning of “professionalism, youthfulness, and internationalization.” The group operates four major divisions: sports, children, e-commerce, and overseas business. The 361 Degrees brand focuses on the functional aspects of professional sports products, mainly catering to core categories such as running, basketball, and sportswear to meet the increasingly diversified demands of the mass sports consumer base; 361 Degrees Kids positions itself as an “expert in youth sports,” offering professional functionality, health technology, and playful fashion to meet the sporting equipment needs of children and teenagers. According to financial reports, in 2024, the company achieved revenue of RMB 10.074 billion, with children's business/e-commerce/international business generating revenues of RMB 2.339 billion/RMB 2.609 billion/RMB 185 million respectively, accounting for 23.22%/25.90%/1.84% of total revenue. The company adopts a franchise distribution model, with over 9,300 global sales outlets. As of 2024, the company had 5,750 domestic core brand stores, 2,548 children’s stores, and 1,365 international sales points covering regions such as the Americas, Europe, and the Belt and Road areas. In April 2024, the overseas e-commerce platform was launched, initiating a new phase of integrated online and offline overseas development; in January 2025, the company opened its first overseas direct store in Kuala Lumpur, Malaysia, further deepening its international presence.

The company’s development process can be divided into three stages:

2003-2011: Period of rapid growth.According to financial reports, from 2006 to 2011, 361 Degrees' revenue grew from RMB 263 million to RMB 5.462 billion, with a CAGR of 83.45%. On the macro level, the 2008 Beijing Olympics stimulated demand in the sports goods industry, providing excellent opportunities for industrial development. During this time, 361 Degrees enhanced its brand influence through several key partnerships: becoming the “CCTV 2007-2008 Sports Event Broadcasting Partner” in 2006; the designated apparel supplier for CCTV Sports Channel in November 2008; signing with the Chinese Table Tennis Super League in May 2009; and becoming the chief partner of volunteers for the Shanghai World Expo in 2010. In June 2009, the company successfully went public, and in September of the same year, it launched the 361 Degrees Children's line, further expanding its business portfolio. From 2008 to 2011, the company rapidly expanded its distribution channels, increasing its store count from 4,632 to 7,865, with a CAGR of 19.30%.

2012-2018: Period of competitive pressure.After 2011, on one hand, the Olympic craze faded, and due to rapid expansion, China's sportswear market faced overall oversupply and increased competition. On the other hand, domestic economic growth slowed down, and downstream demand correspondingly weakened, prompting the industry to begin destocking. According to financial reports, during this period, the company actively participated in international sports event collaborations: supporting the Incheon Asian Games in September 2014; becoming the official partner for the Rio Summer Olympics and Paralympics in 2016; and assisting the 2018 Jakarta Asian Games from August to September 2018. In 2014, the company officially entered overseas markets; in 2015, it aggressively developed e-commerce while promoting the rapid growth of the 361 Degrees Children’s division, initially forming the framework of its four major divisions. From 2012 to 2018, the company's revenue grew from RMB 4.951 billion to RMB 5.187 billion, with a CAGR of 0.78%; the number of stores decreased from 8,082 in 2012 to 5,539 in 2018, with a CAGR of -6.10%. In 2018, the company achieved revenue of RMB 5.187 billion (YOY +0.57%), with children's business/e-commerce/international business generating revenues of RMB 816 million/RMB 739 million/RMB 93 million, accounting for 15.73%/14.25%/1.80% of total revenue.

2019 to present: Renewal and development stage.According to financial reports, in June 2019, the brand introduced a revitalization plan, focusing on multiple areas to achieve an upgrade. Regarding brand positioning, the company strengthened its focus on “professionalism, youthfulness, and internationalization.” On the product side, the company enriched its product portfolio, concentrating on basketball shoes and running shoes. It signed NBA stars Aaron Gordon, Spencer Dinwiddie, and Nikola Jokić and launched signature shoes such as the JOKER1 for Jokić, the DVD1 series for Dinwiddie, and the AG series performance shoes. Additionally, it rolled out racing shoes like the Feibiao and Feiran series. In 2024, the company supported runners in 117 major marathons domestically and internationally, helping athletes reach the podium 114 times, including 76 championships, 23 second-place finishes, and 15 third-place finishes. On the business side, the company focused on its core brands and vigorously developed 361 Degrees Kids. Revenue from the children's business grew from RMB 999 million in 2019 to RMB 2.339 billion in 2024, with a CAGR of 18.55%, and its share of total revenue rose from 17.74% to 23.22%. On the marketing front, the brand actively sponsored major sporting events and popular esports tournaments, independently created the basketball event “Touchdown Ignite,” and expanded collaborations with well-known and classic IPs. It successively launched co-branded products with highly anticipated franchises such as Gundam, PepsiCo, Minions, and CrossFire Mobile. From 2019 to 2024, the company's revenue increased from RMB 5.656 billion to RMB 10.074 billion, with a CAGR of 12.24%; the number of stores grew from 5,515 to 5,750, with a CAGR of 0.84%. In 2024, the company generated revenue of RMB 10.074 billion (YOY +19.59%), with children’s business/e-commerce/international business contributing RMB 2.339 billion/RMB 2.609 billion/RMB 185 million, representing shares of 23.22%/25.90%/1.84% of total revenue.

(II) The Ding family collectively holds 48.99%, maintaining a stable equity structure

As of the end ofFirst Half of 2025, the Ding family collectively holds48.99%, maintaining a stable equity structure. According to financial reports, company president Ding Wu Hao is the brother-in-law of executive directors Ding Hui Huang and Ding Hui Rong. Ding Wu Hao directly holds and indirectly holds through Ding International a total of 17.03% of the company's shares. Ding Hui Huang directly holds and indirectly holds through Mingrong International a total of 16.29% of the company’s shares, while Ding Hui Rong indirectly holds 15.67% of the company’s shares via Huirong International. The Ding family collectively holds 48.99% of the company’s shares. Executive director Wang Jiabao indirectly holds 8.16% of the company’s shares via Jiawei International, and his younger brother Wang Jiachen indirectly holds 8.16% of the company’s shares via Jiachen International.

(III) Stable management team

According to the financial report, the company's board of directors consists of eight members, including four executive directors and four independent directors, with Ding Hui Huang serving as chairman of the board. Company director Ding Wu Hao also serves as the company president, director Ding Hui Rong concurrently serves as vice president, director Wang Jiabao concurrently serves as vice president, Kuang Zhaoqiang serves as chief financial officer and company secretary, Chen Yongling serves as vice president, and Zhang Tieling serves as operations director.

(IV) Financial analysis of the company

The company's performance has continued to grow significantly in recent years. According to financial reports, revenues for 2022-2024 and the first half of 2025 were RMB 6.961/8.423/10.074/5.705 billion respectively, with year-on-year changes of +17.31%/+21.01%/+19.59%/+10.96%; net profit attributable to shareholders was RMB 747/961/1,149/858 million, with year-on-year changes of +24.17%/+28.68%/+19.47%/+8.61%. The compound annual growth rate (CAGR) for revenue/net profit from 2019-2024 was 12.24%/21.61%.

2024, adult footwear and apparel accounted for73.27%, children's footwear and apparel accounted for22.93%; footwear products accounted for53.46%, apparel revenue accounted for42.73%According to the financial report, (1) Adult Footwear: Revenue for 2022-2024 and the first half of 2025 was RMB 2.854/3.510/4.287/2.575 billion respectively, with year-on-year changes of +12.72%/+22.99%/+22.14%/+12.78%. The revenue share accounted for 41.00%/41.67%/42.56%/45.14% respectively.

(2) Adult Apparel: Revenue for 2022-2024 and the first half of 2025 was RMB 2.447/2.687/3.093/1.601 billion respectively, with year-on-year changes of +13.97%/9.81%/+15.11%/1.64%. The revenue share accounted for 35.15%/31.90%/30.70%/28.07% respectively.

(3) Children's Footwear and Apparel: Revenue for 2022-2024 and the first half of 2025 was RMB 1.442/1.923/2.309/1.233 billion respectively, with year-on-year changes of +30.26%/33.36%/20.07%/10.00%. The revenue share accounted for 20.72%/22.83%/22.92%/21.62% respectively.

(4) Accessories, Soles, and Others: Revenue for 2022-2024 and the first half of 2025 was RMB 0.218/0.302/0.383/0.295 billion respectively, with year-on-year changes of +47.30%/38.53%/26.82%/83.15%. The revenue share accounted for 3.13%/3.59%/3.80%/5.17% respectively.

In recent years, the proportion of the company's e-commerce business has gradually increased,2024Annual revenue share25.90%. According to the financial report, (1) Offline: Revenue from offline business for 2022-2024 and the first half of 2025 was RMB 5.276/6.097/7.465/3.888 billion respectively, with year-on-year changes of +12.10%/+15.57%/+22.42%/-0.02%. The revenue share accounted for 75.79%/72.39%/74.10%/68.15% respectively.

（2) E-commerce Channel: Revenue from e-commerce business for 2022-2024 and the first half of 2025 was RMB 1.685/2.326/2.609/1.817 billion respectively, with year-on-year changes of +37.33%/38.04%/12.17%/45.04%. The revenue share accounted for 24.21%/27.61%/25.90%/31.85% respectively. The company's e-commerce business includes its official website and other e-commerce platforms (Taobao, Tmall, JD.com, etc.), which were operated by distributors. On August 30, 2016, the company acquired 80% equity in an e-commerce company, transitioning the e-commerce model from distribution to self-operation. From September to December 2016, the e-commerce business generated revenue of RMB 0.71 billion, accounting for 1.42% of the company's total revenue. From 2017 to 2024, revenue from the e-commerce channel continued to grow significantly, increasing from RMB 0.399 billion in 2017 to RMB 2.609 billion in 2024, with a CAGR of 30.77%.2022-2024and the yearFirst Half of 2025The company’s overall profit margin is relatively stable. According to the financial report, gross profit margins for 2022-2024 and the first half of 2025 were 40.52%, 41.10%, 41.53%, and 41.48% respectively; net profit margins were 11.73%, 12.35%, 11.84%, and 15.03% respectively.

By product category, the gross margin of the company's various products remains stable. According to the financial report, (1) Adult footwear: The gross margins for 2022-2024 and the first half of 2025 were 41.2%, 42.4%, 42.9%, and 43.3%, respectively, showing a continuous slight increase; (2) Adult apparel: The gross margins for 2022-2024 and the first half of 2025 were 41.6%, 40.5%, 41.3%, and 41.3%, respectively, with relatively stable gross margins; (3) Children’s footwear and apparel: The gross margins for 2022-2024 and the first half of 2025 were 40.9%, 42.0%, 41.7%, and 41.6%, respectively, with relatively stable gross margins; (4) Accessories, soles, and others: The gross margins for 2022-2024 and the first half of 2025 were 17.0%, 25.7%, 26.9%, and 26.4%, respectively.

Increased investment in market development has led to a gradual rise in period expense ratios. According to the financial report, the sales expense ratios for 2022-2024 and the first half of 2025 were 20.59%, 22.12%, 21.95%, and 18.17%, respectively. The increase in the sales expense ratio was mainly due to the company allocating more resources to advertising and promotional activities to enhance brand awareness. The management expense ratios were 7.78%, 7.48%, 6.94%, and 5.83%, respectively; the R&D expense ratios were 3.8%, 3.7%, 3.4%, and 2.8%, respectively; and the financial expense ratios were 0.14%, 0.24%, 0.13%, and 0.09%, respectively.

The company's inventory turnover days have shown an upward trend. The inventory turnover days for 2022-2024 and the first half of 2025 were 90.14 days, 91.90 days, 105.72 days, and 109 days, respectively. The increase in inventory turnover is mainly due to the growth of e-commerce business, requiring the company to increase inventory levels to meet immediate online sales demands.

II. Continuous development of the sports footwear and apparel market, with domestic brands' competitiveness steadily improving

(I) Rapid growth in the sports footwear and apparel industry, with China’s sports footwear and apparel market growth rate surpassing global levels

The global sportswear market size will grow steadily, with China’s sportswear market continuing its steady development trend in recent years. According to Euromonitor data cited by Bloomberg, the global sportswear market size reached $239.37 billion in 2024, with a CAGR of 2.46% from 2019 to 2024; China’s sportswear market size was $24.92 billion in 2024, with a CAGR of 4.32% from 2019 to 2024. It is expected that by 2029, the global/China sportswear market size will reach $296.22 billion/$34.81 billion, respectively, with a CAGR of 3.48%/5.20% from 2025 to 2029. The global sports shoe market is expected to continue its upward trajectory, with the resilience of China’s sports shoe market growth continuously evident. According to Euromonitor data cited by Bloomberg, the global sports shoe market size reached $167.22 billion in 2024, with a CAGR of 3.05% from 2019 to 2024; China’s sports shoe market size was $31.81 billion in 2024, with a CAGR of 4.06% from 2019 to 2024. It is expected that by 2029, the global/China sports shoe market size will reach $213.30 billion/$40.43 billion, respectively, with a CAGR of 3.92%/3.82% from 2025 to 2029.

China’s sportswear market continues to lead the apparel industry, with growth significantly outpacing men's and women's apparel categories.According to Euromonitor data cited by Bloomberg, from 2018 to 2029, the overall scale of China’s sportswear industry shows higher growth levels than men’s and women’s apparel. Looking ahead to 2025 to 2029, although the growth rate of the sportswear market is expected to slow down, it will still continue to outperform men’s and women’s apparel, demonstrating stronger growth resilience and long-term expansion potential.

The increase in per capita spending is driving the continued development of the sports footwear and apparel market.China’s per capita clothing consumption is relatively low, with significant room for improvement compared to developed countries. According to data from the National Bureau of Statistics, from 2013 to 2024, the national per capita clothing consumption expenditure showed an overall upward trend, increasing from 1,203 yuan to 1,521 yuan, with a CAGR of 2.64%. Compared to developed countries, China’s clothing consumption potential has not been fully realized. According to Bloomberg data, in 2024, per capita clothing consumption expenditures in China, the United States, and Japan were $208, $1,212, and $798, respectively. China’s per capita clothing consumption expenditure is approximately one-third of Japan’s and one-quarter of the United States’, indicating a significant gap. With the continuous development of China’s economy and the enhancement of residents’ health awareness, the expansion of the sports population is driving a steady increase in demand for sportswear.

Frequent sports industry policies benefit the healthy development of the industry.Since 2021, China has introduced a series of sports industry-related policies, providing detailed guidance on aspects such as the total scale of the sports industry and infrastructure construction, creating a favorable policy environment for industrial development. For instance, the 'Key Points of Mass Sports Work in 2025' is a guiding document issued by the General Administration of Sport of China in February 2025, aiming to promote high-quality development in the national fitness campaign. Guided by **'s thought on socialism with Chinese characteristics for a new era, this document focuses on the conclusion of the '14th Five-Year Plan' and the preparation for the 15th National Games, proposing ten core tasks including improving public fitness service systems, optimizing venue facilities construction, and expanding mass sports events.

The booming sports industry, coupled with the nationwide fitness trend, is driving growth in the athletic footwear and apparel market.According to the goals set in the '14th Five-Year Sports Development Plan,' it is expected that by 2025, the total scale of China's sports industry will reach 5 trillion yuan, with sports services accounting for over 60%. The plan emphasizes improving public fitness service systems, achieving an average per capita sports area of 2.6 square meters, and increasing the proportion of people regularly participating in physical exercise to 38.5%. According to data from the General Administration of Sport, the average per capita sports area in China increased from 1.86 square meters in 2018 to 3.00 square meters in 2024, surpassing the goal set in the '14th Five-Year Plan' ahead of schedule. With residents’ willingness to exercise continuing to rise, this benefits the ongoing expansion of the athletic footwear and apparel market. Based on Wind and sports administration data, from 2015 to 2023, the size of China’s sports industry grew from 1.71 trillion yuan to 3.67 trillion yuan, with a CAGR of 8.86%. As health awareness among residents continues to increase and sports infrastructure improves, the sports consumption market is expected to maintain steady growth.

(II) The competitive landscape of China's athletic apparel market is becoming increasingly diversified, with the trend of domestic brands rising.

The competitive landscape of China's athletic apparel market is becoming more diverse, with domestic athletic brands gaining a larger market share. According to Euromonitor data cited by Bloomberg, the CR5 of China’s athletic footwear and apparel market rose from 58.6% in 2019 to a peak of 59.2% in 2021, then slightly declined to 52.2% in 2024; the CR10 increased from 74.3% in 2019 to 76.7% in 2021, before slightly retreating to 72.1% in 2024. Overall, the market concentration remains relatively high, with leading brands maintaining significant dominance, but since 2021, there has been a slight trend toward decentralization, intensifying competition. According to Euromonitor's 2024 China sports market report, the competitive landscape of China's athletic apparel market is becoming increasingly diversified. Over the past five years, local brands like Li Ning and Anta Sports have made substantial progress, capturing market share from international competitors such as Nike and Adidas. According to Euromonitor data cited by Bloomberg, the market share of China’s athletic brands in the domestic market rose from 37.3% in 2019 to 50.9% in 2024, showcasing strong market competitiveness among local brands. This growth trend is mainly due to the rise of domestic trends, enhanced product capabilities of domestic brands, and the effective implementation of channel penetration strategies. With consumers' continued recognition of domestic brands, the market share of domestic athletic brands is expected to expand further.

International brands lead in market share, while domestic brands are poised for growth. According to Euromonitor data cited by Bloomberg, in the domestic sports market in 2024, Nike ranked first with a 15.10% market share; among domestic brands, Anta Sports and Li Ning ranked second and third with market shares of 10.7% and 9.8%, respectively. Among the top ten brands in the domestic athletic footwear and apparel market, the combined market share of domestic brands rose from 30.4% in 2019 to 39.2% in 2024.

Compared to major domestic publicly-listed sports brands, the company shows better performance in revenue growth and profitability improvement, with significant room for enhancement in operational capabilities (inventory turnover, accounts receivable turnover). We selected major publicly-listed domestic sports brand companies Anta Sports, Li Ning, Xtep International, and 361 Degrees for comparison. In terms of revenue, 361 Degrees ranks fourth among the four domestic sports brands, indicating significant potential for growth. From2019-2024the perspective of annual revenue growth, the compound annual growth rates (CAGR) of Anta Sports/Li Ning/Xtep International/361 Degrees from 2019-2024 were 15.86%/15.62%/10.58%/12.24%, ranking third. However, the company's revenue growth led the industry in 2023-2024. In terms of profitability, regarding gross margin, ① Anta Sports leads the industry, while 361 Degrees ranks fourth, which relates to both brand positioning and each company’s channel structure, as 361 Degrees and Xtep International primarily use a distributor model offline. ② From 2019-2024, the gross margins of Anta Sports/Li Ning/Xtep International/361 Degrees increased by 7.17/0.30/-0.19/1.23 percentage points, with the margin increase ranking second. Regarding net profit margin, ① in 2024, the net profit margins of Anta Sports/Li Ning/Xtep International/361 Degrees were 23.99%/10.51%/11.84%/9.12%, with 361 Degrees ranking just behind Anta Sports.

② From 2019-2024, the net profit margins of Anta Sports/Li Ning/Xtep International/361 Degrees increased by 7.41/-0.29/0.21/3.53 percentage points, with 361 Degrees showing the second-highest increase after Anta Sports, demonstrating strong profitability improvement capabilities. In terms of operational capabilities, regarding inventory turnover days, the inventory turnover days for Anta Sports/Li Ning/Xtep International/361 Degrees in 2024 were 120.72/63.12/79.11/105.72 days, respectively. Due to its higher direct sales ratio, Anta Sports leads in inventory turnover days within the industry, with 361 Degrees following closely behind. However, as the company currently only operates e-commerce channels directly, there remains significant room for improvement in inventory turnover efficiency. Regarding accounts receivable turnover days, the figures for Anta Sports/Li Ning/Xtep International/361 Degrees in 2024 were 20.83/13.87/132.40/146.88 days, respectively. The accounts receivable turnover days for 361 Degrees remained relatively stable from 2019-2024 and are at a relatively high level within the industry, presenting considerable room for improvement.

3. High quality-price ratio aligns with consumption trends; children's products and e-commerce businesses see high growth, while Super Value Stores are expected to unlock offline growth potential

(1) Products: Targeting mass-market sports, emphasizing professionalism+High quality-price ratio products

361 Degrees positions itself with 'professionalism, youthfulness, internationalization' as its brand focus, primarily targeting the mass-market sports segment with an emphasis on categories like running, basketball, and sports lifestyle, while also expanding into emerging sectors such as outdoor activities and women’s fitness. The company provides professional sports products for mass consumers with excellent value for money.

The average unit price of the company’s products has shown a slight upward trend. According to the company’s financial reports, from 2014 to 2024, the CAGR of the average wholesale price for adult shoes and apparel was 3.79% and 1.74%, respectively.

(2) Channels: Deep penetration into lower-tier offline markets; new Super Value Store format is expected to unlock offline growth potential, while e-commerce channels experience rapid growth

361 Degrees centers around consumers, adopting a full-channel strategy that integrates online and offline operations. Through multi-dimensional precision management, it maximizes the potential of e-commerce platforms while building diversified offline channels, promoting deep integration between online and offline.

1. Offline stores have deeply penetrated lower-tier markets, covering extensive areas, while the new Super Value Store format embarks on a new journey

361Core brand stores of 361 Degrees: From 2012 to 2018, due to industry destocking and slower economic growth, the number of core brand stores underwent adjustments, decreasing from 8,082 in 2012 to 5,535 in 2018; in 2019, it slightly increased to 5,519. From 2020 to 2022, the number fluctuated due to restrictions on offline consumption scenarios, dropping to 5,480 by 2022. In 2023-2024, the number of stores remained relatively stable at 5,734 and 5,750, respectively.

In terms of regional distribution, the northern region is widely covered. According to financial reports, in 2024, the number of core brand stores in the eastern, southern, western, and northern regions of 361 Degrees were 1124/664/1294/2668, accounting for 19.5%/11.5%/22.5%/46.5%, respectively.

The Super Store, as a new retail format, is expected to boost offline performance growth continuously. According to financial reports, in December 2024, the first 361 Degrees Super Store opened in Shijiazhuang, Hebei, and quickly replicated this model in Huizhou, Chengdu, and Nanning. The Super Store, as an emerging channel, aims to establish a self-service model offering extreme cost-performance sports products. As a new retail format, the Super Store relies on spacious areas, full-scenario category coverage, and one-stop self-service shopping, successfully building a differentiated advantage that further enhances the convenience and autonomy of the consumer experience. According to the company’s official WeChat account, by June 30, 2025, the company has cumulatively opened 49 Super Stores, including 45 large-scale stores and 4 children's stores.

2. E-commerce channel revenue continues to grow significantly.

The company’s e-commerce business revenue has continued to grow significantly, with its revenue share increasing steadily. According to the company’s financial reports, in 2015, the company officially entered e-commerce through distributor operations; in August 2016, the company acquired 80% equity of the e-commerce company operated by the distributor, transitioning the e-commerce business from a distribution model to a self-operated model. From 2017 to 2024, e-commerce business revenue increased from RMB 3.99 billion to RMB 26.09 billion, with a CAGR of 30.77%, and its revenue share rose from 7.74% to 25.90%. From 2021 to 2024, year-over-year changes in e-commerce business revenue were 55.07%/37.31%/37.98%/12.21%, respectively. The CAGR of e-commerce business revenue from 2020 to 2024 was 34.75%; in H1 2025, e-commerce business achieved revenue of RMB 1.817 billion, up 45.00% YoY, with a revenue share of 31.85%. The continuous strong growth of the company’s e-commerce business is mainly attributed to: (1) Market analysis based on big data for precise development of online exclusive products, launching online-exclusive products emphasizing 'high aesthetics, high technology, high value' on e-commerce platforms, differentiating from offline products. (2) Leveraging online sales festivals as opportunities to push limited-edition items for online debut, creating sales booms and promoting interaction between online and offline channels. (3) Focusing on numerous high-quality platforms inside and outside the site to enhance target audience penetration, improve original content creation capabilities, expand brand influence and fan engagement, build vertical community marketing to cultivate seed users, and enhance marketing promotion effectiveness in multiple dimensions.

(III) Marketing: Event Sponsorship+Self-owned IP Events+Athlete and celebrity endorsements form the marketing system

361 Degrees, based on professional sports, has formed a marketing system comprising major sporting events, professional sports teams, elite athletes and endorsers, and self-owned IP events. Sponsorship of major sporting events increases brand awareness. According to the company’s financial reports, since 2010, the company has been the official partner of five consecutive Asian Games (2010 Guangzhou Asian Games, 2014 Incheon Asian Games, 2018 Jakarta Asian Games, 2020 Hangzhou Asian Games, 2026 Aichi-Nagoya Asian Games), with the Asian Games DNA deeply integrated into the brand; in 2024, it became the official sports apparel supplier of World Aquatics and the official partner of the 2025 Harbin Asian Winter Games. In the running field, the company leverages marathon events to increase its influence in the running community. In 2024, the company sponsored 117 domestic and international marathon events, helping athletes achieve 114 podium finishes (76 championships, 23 runner-up positions, and 15 third-place finishes). 361 Degrees Kids is the official partner of the China Jump Rope National Team, exclusively naming the 2024 Asian Jump Rope Championships and sponsoring national leagues, actively promoting youth jump rope sports. Around core sports categories, the company creates self-ownedIPEvents, building 'professional competitions'+Mass participation' marketing campaigns. 'Track No. 3'10KMThe '10KM Speed Race Series' is a high-level event organized by 361 Degrees for elite runners. In 2024, the event will be held in seven core cities including Shijiazhuang, Chengdu, Dezhou, Zhengzhou, Nanjing, Xi'an, and Guangzhou, attracting over 15,000 participants. The 'Track No. 3' community has grown to 400 groups with more than 150,000 members, and the mini-program has reached 60,000 registered users. Additionally, 'Track No. 3 CLUB' stores have been opened in Xiamen and Qinhuangdao, providing runners with full product offerings and comprehensive running experiences. The company has also successfully created its own basketball competition, 'Touch and Ignite,' which expanded to include overseas matches for the first time in 2024. There were approximately 300 participating teams and around 1,200 players, while the 'Touch and Ignite' community surpassed 100,000 members, establishing itself as one of the top grassroots basketball events in China. For women's training products, the brand leverages its own event, 'Women’s Fitness Meetup,' to build an active sports community and expand its customer base. In 2024, the brand hosted 34 offline community events across 17 cities.“See you on the board.” (Skateboarding event, held in four cities including Shijiazhuang and Lanzhou in 2024),“On the field, it is said”(Self-organized football tournament, organizing over 110 matches in Guiyang, Shijiazhuang, and Chengdu in 2024) as two new events and activities. 361 Degrees Kids collaborated with top-tier Chinese Super League club 'Beijing Guoan' to host a 'Youth3V3"Football Champions League" has become a landmark competition for domestic youth.

Endorsements by athletes and stars drive niche categories to break through their traditional boundaries, expanding brand influence. According to financial reports, the company signed four international basketball stars: Nikola Jokic, Aaron Gordon, Spencer Dinwiddie, and Kentavious Caldwell-Pope. In September 2024, Aaron Gordon’s fifth signature basketball shoe, “AG5,” was launched; in December 2024, the company collaborated with Nikola Jokic to launch his first signature shoe, "JOKER1". From 2024 to 2025, three star athletes will conduct "Star China Tours," spanning multiple cities to engage closely with consumer groups, further enhancing brand influence. In the running category, endorsers include You-Sheng Guan, Kassie Derseh KINDIE, and SISAY Meseret Gola. In March 2024, You-Sheng Guan won the 2024 Japan Biwako Marathon wearing 361 Degrees' racing shoes, “Fei Ran 3.” In September 2024, Kassie Derseh KINDIE and SISAY Meseret Gola set new records for best performances using 361 Degrees’ racing shoes, marking the brand's first entry into the top ten of the World Marathon Majors. Regarding celebrity endorsements, in September 2024, brand ambassador Rui Peng Ao appeared as a “one-day store manager” at stores in Zhengzhou and Dalian. Focusing on Gen Z consumption, the company accelerates its expansion. According to the financial report, in terms of specialized tracks, the company launched the “Light Adventure Series” in the light outdoor track, releasing the attitude video “Big World, Light Adventure”. In the outdoor sun protection market, it introduced the “Sunproof” sunscreen product. In trendy sectors like skateboarding, through events such as “Skateboard City Meets” and sponsoring the Strawberry Music Festival PRO Zone, it deeply integrated itself into the cultural circles of young people, strengthening the youthful branding. Product-wise, the company actively collaborates with popular IPs, using co-branded series products to achieve breakthroughs within younger demographics. The “Third Degree Studio” gathers top talents in the sports and outdoor fields, partnering with popular IPs like Xiao Liu Ya and Bored Ape, launching co-branded products like “Slacking Affairs Department” and “Spirit Eye PRO,” breaking through demographic barriers with fun and trendy designs.

(4) Research and Development: High R&D expense ratio, focusing on technology and specialization

361Degrees has built a technology-driven R&D system at its core, continuously increasing investment in professional sports areas such as running and basketball, promoting continuous upgrades in product technology. The company’s R&D expense ratio has consistently ranked among the top in comparable sports companies. According to each company’s financial reports, in 2024, 361 Degrees’ R&D expense ratio was 3.39%, higher than Anta Sports’ 2.81%, Li Ning’s 2.36%, and Xtep International’s 2.90%. The company’s Innovation Center holds titles such as National High-tech Enterprise, National Green Factory, National Green Supply Chain Management Enterprise, National Sports Industry Demonstration Unit, National Industrial Design Center, National Academic Service Station, National Intellectual Property Advantage Enterprise, “SciTech China” Doctor Innovation Station, and Provincial Technology Center. According to the financial report, as of 2024, the company has cumulatively obtained 633 patents, an increase of 139 from 2023; it employs 836 R&D technical personnel, including 417 footwear R&D staff, 310 apparel R&D staff, and 109 children and accessories R&D staff.

The company primarily drives innovation through material technology advancements, product portfolio expansion, and sports science support. In terms of material technology innovation, the company leverages resources from its National Industrial Design Center and Innovation Lab, focusing on breakthroughs in material science and cutting-edge product development. Notable achievements include industrial applications of technologies such as CQTEXTREME supercritical foaming midsole, screen technology waterproof breathable membrane (waterproof up to 8000mmH2O, breathability rate 8000g/m²/24H), and explosive technology down water-repellent treatment. In terms of product portfolio, the company not only continuously refines its offerings but also actively applies material technology. According to the financial report, in June 2024, the company launched the Miro NUDE carbon plate racing shoes, weighing less than 110 grams per shoe; made with PA12 nylon rough embryo, providing 90% energy return, an ultra-lightweight carbon plate starter provides propulsion; 100% carbon fiber upper is lightweight and breathable. In August 2024, Fei Biao 2 was launched, aiding 361 Degrees’ endorser Kassie Derseh KINDIE to achieve a record-breaking performance of 2 hours 5 minutes 54 seconds in the Berlin Marathon. In December 2024, the company collaborated with Nikola Jokic to release his first signature shoe, JOKER 1, featuring full-length CQT supercritical midsole with rebound elasticity up to 75%; dual TPU on inner and outer sides and heel; foot arch anti-twist piece; and Diamond Grip abrasion-resistant technology in the sole.

(5) Children’s business continues strong growth, forming a second growth curve

(VI) Early international business layout, with significant room for growth

According to the company’s financial report, in 2014 the company terminated cooperation with overseas distributors and established an independent overseas subsidiary to initiate a global overseas strategy. The international business focuses on high-end functional running and training products, mainly selling international series products, which have been recognized by multiple international awards over the years. As of the first half of 2025, the company has 1,357 sales outlets in overseas markets, covering regions such as the Americas, Europe, and countries along the 'Belt and Road.' In 2024, the company launched an independent overseas e-commerce website, marking a key step in integrating online and offline channels in overseas markets for 361 Degrees.

The company flexibly adjusts its internationalization strategy based on market conditions, continuously exploring emerging overseas markets and expanding brand influence. According to the company’s financial report, from 2014 to 2024, the CAGR of international business revenue reached 16.63%. It can be roughly divided into three phases: (1) From 2014 to 2019: the CAGR of international business revenue reached 27.08%, with annual revenue growth rates being 12.31%/80.54%/10.66%/4.48%/41.37% respectively from 2015 to 2019. In 2016, international business revenue surged significantly due to 361 Degrees becoming the first Chinese sports brand to be an official supplier for the Rio Olympics, significantly boosting brand awareness in Brazil. Sales outlets in Brazil increased by 145% year-over-year, reaching 1,017 stores, delivering strong sales performance. In 2018, international business revenue growth slowed due to the Sino-US trade war causing global macroeconomic uncertainty. In 2020, due to the adverse impact of the pandemic, overseas market demand weakened, resulting in a significant reduction in international sales outlets and a 45.87% year-over-year decline in international business revenue.2） 2020-2023Year: The CAGR of international business revenue reached 37.45%, partly because overseas markets gradually recovered post-pandemic, and partly because the company placed greater emphasis on steady overseas market development rather than pursuing growth in the number of sales outlets. The focus was on consolidating and developing emerging markets in Europe and the Belt and Road regions, adopting proactive marketing strategies to enhance brand image and market recognition abroad.3）2024Since [year]: In 2024, the company’s international business revenue declined by 0.05% year-over-year. It launched an independent overseas e-commerce site, initiating the integration of online and offline overseas channels, and opened its first overseas directly operated store in Kuala Lumpur, Malaysia. In the first half of 2025, the company’s international business revenue grew by 19.70% year-over-year.

IV. Profit Forecast and Investment Recommendations

We have made the following assumptions regarding the company's profitability:

Revenue: We expect the company’s revenue for 2025-2027 to reach RMB 11.156/12.446/13.892 billion respectively, with year-over-year growth of +10.74%/+11.57%/+11.61%. Specifically:1. Adult category: We expect revenue from the adult category to reach RMB 7.988/8.723/9.536 billion in 2025-2027 respectively, with year-over-year growth of +8.23%/+9.21%/+9.32%. Specifically: (1) Footwear: We project revenue from footwear to reach RMB 4.802/5.378/6.023 billion in 2025-2027 respectively, with year-over-year growth of +12.00%/+12.00%/+12.00%. In H1 2025, adult footwear revenue increased by 12.78% year-over-year. We anticipate that adult footwear will maintain relatively fast growth during 2025-2027.

（2) Apparel: We forecast revenue from apparel to reach RMB 3.186/3.345/3.513 billion in 2025-2027 respectively, with year-over-year growth of +3.00%/+5.00%/+5.00%. In H1 2025, adult apparel revenue increased by 1.64% year-over-year. Given that Q4 is the peak season for apparel sales, we expect low single-digit growth in apparel revenue in 2025; as 2026 is a major sports year, we anticipate it will stimulate end-user consumption, and children’s apparel revenue is expected to maintain mid-single-digit growth during 2026-2027.2. Children’s category: We expect revenue from the children’s category to reach RMB 2.593/2.976/3.384 billion in 2025-2027 respectively, with year-over-year growth of +12.27%/+14.76%/+13.72%. Specifically: (1) Footwear: We estimate revenue from footwear to reach RMB 1.406/1.729/2.075 billion in 2025-2027 respectively, with year-over-year growth of +28.00%/+23.00%/+20.00%. In H1 2025, children’s footwear revenue increased by 27.85% year-over-year. We expect children’s footwear revenue to maintain relatively rapid growth during 2025-2027. (2) Apparel: We project revenue from apparel to reach RMB 1.187/1.246/1.309 billion in 2025-2027 respectively, with year-over-year growth of -2.00%/+5.00%/+5.00%. In H1 2025, children’s apparel revenue declined by 7.58% year-over-year. We expect low single-digit growth in children’s apparel revenue in 2025; as 2026 is a major sports year, we anticipate it will stimulate end-user consumption, and children’s apparel revenue is expected to maintain mid-single-digit growth during 2026-2027.

2. Others: We expect revenue to reach RMB 0.575/0.747/0.972 billion in 2025-2027 respectively, with year-over-year growth of +50.00%/+30.00%/+30.00%.

Gross margin: We expect gross margins for 2025-2027 to reach 41.43%/41.45%/41.46% respectively. Gross margins for adult footwear are 43.23%/43.43%/43.63%, showing a slight increase due to the high technological content of footwear products, with the company continuing to invest heavily in R&D and improve its product portfolio, driving innovation. Gross margins for adult apparel are 41.27%/41.27%/41.27%, remaining stable. Gross margins for children’s footwear are 41.99%/42.29%/42.59%, showing a slight increase due to the high technological content of footwear products, with the company continuing to invest heavily in R&D and improve its product portfolio, driving innovation. Gross margins for children’s apparel are 40.95%/40.95%/40.95%, remaining stable. Expense ratio: We expect the company’s overall expense ratio to remain relatively stable, with the sales expense ratio expected to be 21.95%/21.95%/21.95% in 2025-2027, remaining stable. Administrative expense ratio is expected to be 6.74%/6.64%/6.54%, showing a slight decline due to the company’s continued cost control and some fixed management expenses. The R&D expense ratio is expected to be 3.39%/3.39%/3.39%, remaining stable.

Investment recommendation: In summary, the company's net profit attributable to shareholders is expected to be RMB 1.269/1.409/1.559 billion for 2025-2027 respectively, with year-on-year growth of 10.50%/11.01%/10.65%. The EPS will be RMB 0.61/0.68/0.75 per share respectively. Referring to the valuation of comparable companies and considering the company’s revenue scale is smaller than its peers, we assign the company a PE ratio of 10 times for 2026. Based on the exchange rate of CNY/HKD=0.9078 as of December 2025, the corresponding fair value is HKD 7.53 per share. This is our first coverage of the company, and we assign it a “Buy” rating.

V. Risk Warning

(1) Risk of a decline in the global macroeconomy

A sustained economic downturn would affect end-user consumption. If consumer spending remains persistently weak, it will significantly impact the overall apparel consumption market. Any blockage in downstream sales channels could affect the entire industry.

(2) Risk of global supply chain disruptions

If global supply chains are disrupted, rising freight costs will negatively impact the company’s performance. Additionally, supply chain disruptions may lead to short-term product shortages or future inventory overstock, increasing operational risks associated with excess inventory.

(3) Risk of rising labor costs

The textile and apparel industry is labor-intensive, and complete mechanization or intelligent production is difficult to achieve in the short term. A significant increase in domestic labor costs would adversely affect the industry.