Huayuan Securities: Full-year revenue for 2025 increased by 11% year-over-year, with continuous optimization of the accounts receivable aging structure

Key Investment Points:

Revenue/net profit attributable to shareholders for 2025 increased by 11%/14% respectively. 361 Degrees released its full-year 2025 performance. In 2025, the company achieved revenue of 11.15 billion yuan, up 10.6% year-over-year; net profit attributable to shareholders was 1.31 billion yuan, up 14.0% year-over-year. Gross margin was 41.5%, roughly flat year-over-year; net profit margin attributable to shareholders was 11.7%, up 0.3 percentage points year-over-year. Regarding dividends, the company maintained a payout ratio of 45% in 2025, with a full-year dividend of 31.7 Hong Kong cents per share, showing continued strong willingness to pay dividends.

Operating cash flow increased significantly, with continuous optimization of the accounts receivable aging structure.According to the company’s announcement, the net operating cash flow for 2025 was 810 million yuan, surging 1067% year-over-year, mainly driven by contributions from pre-tax profits, changes in inventory, and changes in accounts payable and other payables. On the pre-tax profit side, the company's gross profit in 2025 increased by 10.6% year-over-year, and the sales expense ratio/management expense ratio (excluding one-time donations) decreased by 1.7 percentage points/0.2 percentage points year-over-year, pushing pre-tax profit up by 12.4% year-over-year. On the inventory change side, from a cash flow perspective, the company's inventory change in 2025 was 31 million yuan, showing significant improvement compared to 2024, with smooth inventory reduction. On the accounts payable and other payables change side, it was 230 million yuan in 2025, up 99.5% year-over-year. Additionally, the proportion of accounts receivable with an aging of 90 days or more accounted for 24.5% in 2025, down 13.0 percentage points year-over-year, with the accounts receivable aging structure continuing to improve.

Footwear business maintained steady growth, with e-commerce business revenue increasing by 26% year-over-year.According to the company’s announcement, revenue from apparel (footwear + clothing)/children’s products (footwear + clothing) in 2025 was 8.05 billion/2.53 billion yuan, up 9.1%/9.6% year-over-year respectively. By category, driven by core products such as running shoes (Feiran 5, Feiran 5 FUTURE) and basketball shoes (JOKER 2, AG6), the company’s footwear revenue reached 6.04 billion yuan in 2025, up 12.2% year-over-year, accounting for 54.2% of total revenue, up 0.7 percentage points year-over-year. By channel, offline channel “Super Stores” expansion progressed smoothly, with the number of stores reaching 127 (as of December 31, 2025), slightly exceeding market expectations. The online channel maintained rapid retail sales growth throughout the year, with revenue in 2025 increasing by 26% year-over-year. The brand has fully integrated into instant retail platforms (such as Meituan Flash Purchase), and future revenue is expected to continue its high-growth trend.

The expansion of overseas operations and outdoor businesses is expected to become a new growth driver for the company.According to company announcements, on the overseas business front, by 2025, the company has established a sales network (with 1,253 sales outlets) covering overseas countries and regions in the Americas, Europe, and other areas. International business revenue increased by 125% year-on-year. In the future, the increase in cross-border e-commerce penetration is expected to help the company maintain high growth in its overseas business. On the outdoor business front, the company opened seven OneWay stores in 2025, and offline stores are expected to continue expanding.

Profit forecast and rating:We expect the company’s net profit attributable to shareholders for 2026-2028 to reach 1.48 billion yuan / 1.64 billion yuan / 1.82 billion yuan, representing year-on-year growth of 13.2% / 10.7% / 11.1%, respectively. Considering the company's strong brand image, product research and development capabilities, and marketing capabilities within the sportswear sector, we maintain a 'Buy' rating.

Risk warning.Risks include slower-than-expected recovery in the retail environment, risks related to store expansion progress, and risks associated with underperformance of some niche products.

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