Investment Rating - The report maintains a "Buy" rating for 361 Degrees (01361) [1] Core Views - 361 Degrees achieved strong growth in its children's wear business, driven by professional, health-tech, and fashionable products, with sales volume increasing by 26.0% YoY [1] - The company's e-commerce business also performed well, with revenue increasing by 16.1% YoY to 1.25 billion RMB, accounting for 24.4% of total revenue [1] - During the "618" shopping festival, the company's e-commerce sales surged by 94%, ranking third among domestic brands, with sales volume growth of 99%, the highest in the industry [1] - Overseas revenue declined due to weak demand in some South American countries [1] - The company is focusing on professional sports, youth, and internationalization, with 562 patents as of June 30, 2024, and plans to increase R&D spending to 3%-4% of revenue in H2 2024 [1] Financial Performance - 24H1 revenue reached 5.14 billion RMB, up 19.2% YoY, with net profit attributable to shareholders of 790 million RMB, up 12.2% YoY [1] - Gross margin was 41.3%, down 0.4 pct YoY, while net profit margin was 15.4%, down 0.9 pct YoY [1] - Basic EPS was 38.2 RMB cents, up 12.4% YoY, with a dividend of 16.5 HK cents and a payout ratio of 40.3% [1] - Advertising and promotional expenses accounted for 10.5% of revenue, up 1.7 pct YoY, while employee costs accounted for 6.2%, down 0.9 pct YoY [1] - R&D expenses accounted for 2.8% of revenue, down 0.4 pct YoY [1] Product Breakdown - Adult footwear revenue was 2.28 billion RMB, up 20.1% YoY, accounting for 44.4% of total revenue, with a gross margin of 42.8%, down 0.7 pct YoY [1] - Adult apparel revenue was 1.58 billion RMB, up 15.7% YoY, accounting for 30.7% of total revenue, with a gross margin of 40.2%, up 0.1 pct YoY [1] - Children's products revenue was 1.13 billion RMB, up 24.2% YoY, accounting for 22.0% of total revenue, with a gross margin of 41.7%, down 0.7 pct YoY [1] Store Network - As of the end of the period, the company had 2,550 children's sales outlets in mainland China, with 45.2% located in the north [1] - The company had 5,740 stores in mainland China, with 46.6% located in the north [1] Future Outlook - The company is expected to achieve revenue of 10.09 billion RMB, 11.69 billion RMB, and 13.45 billion RMB in 2024, 2025, and 2026, respectively [1] - Net profit attributable to shareholders is expected to be 1.11 billion RMB, 1.29 billion RMB, and 1.53 billion RMB in 2024, 2025, and 2026, respectively [1] - EPS is expected to be 0.54 RMB, 0.62 RMB, and 0.74 RMB in 2024, 2025, and 2026, respectively [1]
361度：童装业务增长突出