指引未变但我们感到担忧

361 Degrees (1361 HK) Guidance unchanged but we are concerned Target PriceHK$7.09(Previous TPHK$5.97)Up/Downside23.2%Current PriceHK$5.76 1H25 resultswerea small miss, in our view, and despite the confirmation ofFY25E guidance, we have turned more concerned about its store opening plan,offline sales growth and inventory days. However, because of its relatively lowvaluation vs peers, plus its better-than-peers’retail sales growth in 1H25, wemaintain BUY and raise TP to HK$ 7.09, based on 11x FY25E P/E. On one hand, we believe the FY25E guidance is achievable, but on theother hand, we do see a few risks or concerns as well.We are stillconfident onthe FY25E guidance (esp. the 10% to 15% sales growth in2H25E), because: 1) 361Degrees’ products are still priced lower vs peers,hencetheycould still benefit from the consumption trade-down demand, 2)its basketball segment growth is still fairly strong (thanks to successfulsponsorships with Nikola Jokic and his first China tour), 3) star products arestill selling well (e.g. the Furious Future 2, Flying Flame 4 running shoes,Big3 5.0, DVD3 and Joker1 basketball shoes), 4) opening of more SuperPremium stores(still targeting 100 by the end of FY25E), 5) relatively fastere-commerce sales growth (even though we are factoring in a possibleslowdown in 2H25E),and6)the re-opening of ONE WAY brand stores(about 5 new distributor stores will be opened before Oct 2025). China Consumer DiscretionaryWalter WOO(852) 3761 8776walterwoo@cmbi.com.hk Stock Data However, we do need to highlight a few concerns, namely: 1) risks aboutthe store-opening plans(while more Super Premium stores could beopened, the associated distributorsare likely to close some other regularstores at the same time, and thismightdrag down future sales or trade fairorder growth), esp. when the number of 361 Degrees adult storeswasstillfalling HoH in 1H25. 2) The enduring pressure on offline sales per store,partly due to sluggish foot traffic and rise in competition. If the SSSGremainslow or turnsnegative,this might resultin weaker sentiment forfuture trade order growth. 3) Climb in inventory days. Inventory days alreadyincreased to 109 days in 1H25, which is quiteclose to the level back inFY20. If thesituation persists, retail discounts may be widened or moreprovisionsmaybe needed in the future. Maintain BUY and raise TP slightly to HK$7.09, based on 11x FY25EP/E.We have revised down FY25E/ 26E/ 27E net profit forecasts by 3%/5%/ 6%, in order tofactor in a slower offline sales growth, slower storeexpansion and weaker opex control.Our TP is based on 11x FY25E P/E(up from 9x, due to its better-than-peers’growth in FY25E and a higherdividend payout ratio).The stock is trading at 9x FY25E P/E with a 6%FY25E yield, still trading below the industry average of 12x FY25E (or Xtep’s10x, Li Ning’s 16x and Anta’s 17x). Source: FactSet Recent Reports:Xtep (1368 HK)-2Q25 was weak butguidance remained intact(17Jul25) Anta Sports (2020 HK)-Anta brand’smiss offset by other brands’ beat(16Jul25) Li Ning (2331 HK)-2Q25 roughly inlineand transition in progress(15Jul25) Topsports (6110 HK)-Prudent guidancebut strong cash flow & yield(23May25) Xtep (1368 HK)-Inline 1Q25 results anda moderate outlook(18Apr25) Anta Sports (2020 HK)-Acquisition ofJack Wolfskin finally announced(14Apr25) Sales trend in Jul to mid-Aug 2025 is similar to that in 2Q25.According tomanagement, Jul to mid-Aug 2025isstill considered the low season, and retail salesgrowth trend israther similar to that in 2Q25, which is about 10% for offline and 20%for e-commerce. The retail discounts during the same periodarealso stable QoQ, atabout 30% off. FY25E guidance maintained but management also highlighted that the trend in2H25E could be similar to that in 1H25.Management did reiterate its FY25Eguidance, which consisted of 10%-15% sales growth (mostly from volume growth),40%-42% GP margin, 10%-13% A&P expenses, 3%-4% R&D expenses and 10%-12%NP margin. But at the sametime, they are confident thatthe momentumin 1H25couldsustaininto 2H25E. Update on the 361 Degrees Super Premium store.The Company has opened about49Super Premiumstores in 1H25 and the total store count shall reach 100 by FY25E,as targeted by the Company.The average store size is at around 800 to 1000 sq.m.,offering about 700 to 800 SKUs(400 to 450 apparel and 250 to 300 footwear). About20% to 30%/ 40% to 50%/ 20% to 30% are hot-selling products/ value-for-moneyproducts for mass market/off-season items.The retail discount, on average, is at about30% to 40% off (vs around 30% off for regular stores) and the wholesale discount, onaverage, is at about 62% to 68% off (vs 62% off for regular stores). However, thanksto larger sales per store andmoreitems per ticket (as high as 4 to 5), the overall netprofit margin (of this distributor store) is still similar to that for regular stores.Currentlyspeaking, 6%/ 40%/ 54% of these stores are located in tier 1/ tier 2/ tier 3 or belowcities.1H25 res