Guoxin Securities: Maintaining relatively rapid growth at a high base of 361 degrees (01361) in the first quarter, actively promoting professional products

On April 10, the company announced retail performance for the first quarter of 2024. The 361 degree offline retail sales of major brands recorded high double-digit positive growth, children's clothing brands recorded positive growth of 20%-25% in offline retail sales, and e-commerce platforms recorded positive growth of 20%-25%.

Guoxin Textile's opinion: 1) Adult clothing offline sales increased by double digits in the first quarter of 2024, and offline children's clothing and e-commerce increased by 20%-25%, maintaining 2024 expectations；2) Risk warning:The pandemic has repeatedly impacted consumer demand; channel expansion falls short of expectations; brand image has been damaged; and the market's systemic risks.

3) Investment advice: Strong performance in the beginning of 2024. Optimistic about professional sports series, children's clothing, and e-commerce drive growth in the medium to long term.The company's turnover maintained strong growth in the first quarter on a high basis, and continued to maintain a relatively optimistic outlook for 2024. Since the company launched the rebranding plan, product and channel adjustments have begun to improve, brand product potential has improved, and financial business conditions have improved. In the medium to long term, the company's rich IP matrix for professional products will drive a sharp rise in volume and price, and there is plenty of room for brand growth. Maintaining the profit forecast, the company's net profit for 2024-2026 is expected to be 11.4/13.2/1.53 billion, up 18.0%/16.4%/15.6% year over year, and maintain the target price to HK$5.7-6.0, corresponding to PE 9.5-10x in 2024, maintaining a “buy” rating.

1) Offline: 361 degrees, high double digit growth, children's clothing growth of 20%-25%;

2) Online: 361 degree online increase of 20%-25%.

2、New products: The company continues to launch new professional sports products. In the first quarter, in the field of running, 361 degrees launched a new color scheme for professional marathon racing running shoes, the Flying Fire 3, equipped with an original dynamic carbon plate, which is both highly attractive. At the same time, professional running shoe products such as Shippeng Family and Biking Speed 3pro were launched, covering various needs such as professional racing, daily training, and physical examinations. In the field of comprehensive training, the company launched Women's Professional Sports New Skin 4.0, which uses a new Chinese elegant and deep low-saturation aesthetic color scheme to provide soft and resilient external protection.

3、Stock to sale ratio and retail discounts:The inventory ratio remained at 4-4.5; retail discounts in the first quarter were 30% off, mainly due to the intense competitive environment.

4、2024 Expectations:Revenue is expected to grow by 15%-20%, and is expected to reach 10 billion dollars of revenue for the whole year. Maintain the projected net opening of 100-200 stores for bulky goods and children's clothing, respectively.

The company's turnover maintained strong growth in the first quarter on a high basis, and continued to maintain a relatively optimistic outlook for 2024. Since the company launched the rebranding plan, product and channel adjustments have begun to improve, brand product potential has improved, and financial business conditions have improved. In the medium to long term, the company's rich IP matrix for professional products will drive a sharp rise in volume and price, and there is plenty of room for brand growth. Maintaining the profit forecast, the company's net profit for 2024-2026 is expected to be 11.4/13.2/1.53 billion, up 18.0%/16.4%/15.6% year over year, and maintain the target price to HK$5.7-6.0, corresponding to PE 9.5-10x in 2024, maintaining a “buy” rating.

Risk warning:The pandemic has repeatedly impacted consumer demand; channel expansion falls short of expectations; brand image has been damaged; and the market's systemic risks.