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361 Degrees delivered solid 1H26 results with revenue and net profit both rose 8.0% YoY, GPM +0.3ppt to 41.8%, operating cash flow +17% and stable 45% dividend payout. Operations stayed balanced across segments, while Super Premium Stores reached 188. Mgmt. was more cautious on near-term traffic (soft July), but we still see 3Q26 retail sell-through recovering toward mid-to-high single digits if Aug–Sep execute. Valuation remains undemanding on 6-7x 2026E PE with about 7% dividend yield.

Revenue in line, NP slightly beat. 361 Degrees reported 1H26 revenue and profit attributable to equity holders both grew 8.0% YoY to RMB 6,159.8mn and RMB 925.9mn; Gross profit rose 8.7% to RMB 2,572.9mn with GPM expanded 0.3ppt to 41.8%; Operating profit rose 5.6% to RMB 1,200.9mn, with OPM easing 0.4ppt to 19.5% as administrative expenses jumped 21.7% (donations RMB 60.7mn vs RMB 16.8mn; R&D +12.9%); Attributable NPM held flat at 15.0%; basic EPS was RMB 44.4 cents (+7.0%). Excluding the excess donation drag in 1H26, adjusted NP is a slight beat versus consensus. Cash generation stayed healthy with net operating cash inflow of RMB 611.5mn (+16.7%). Interim DPS of HK22.2 cents (+8.8%) keeps the 45% payout commitment intact.

Balanced top line with stable margins. By product: footwear +7.0% YoY to RMB 3,517.4mn (57.1% of sales) and apparel +10.0% to RMB 2,336.6mn (37.9%); accessories & soles +3.7%. Within footwear categories, running remains c.50% of footwear revenue (+8% YoY), basketball c.8% (+5%) and lifestyle c.42% (+3%); overall still a volume-led mass-sports story rather than ASP-led. By brand mix: core brand revenue +8.6% YoY (74% of sales) and Kids +6.9% YoY (21%); Kids footwear was the standout (+11.7%) while Kids apparel was flattish. E-commerce revenue +9.5% YoY to RMB 1,989.0mn and contributed 32.3% of group sales; offline +7.3%. Overall, 1H26 met mgmt. internal quality-oriented targets and outpaced a soft industry backdrop.

Sales growth decelerated into 2Q26, but channel health held. Core brand offline sell-through was c.+10% YoY in 1Q26 and slowed to +mid-to-high single digit in 2Q26; Kids offline followed the same path; e-commerce cooled from +mid-teens YoY in 1Q26 to +high-single-digit in 2Q26 after prior volume chasing. On the positive side, offline retail discount stayed orderly and channel inventory turnover remained c.4.5–5.0x. A&P spend only +1.5% YoY in 1H26 (9.5% of sales, −0.6ppt YoY), while total selling & distribution +4.2% YoY in 1H26, representing disciplined opex. Store network reform continues. As of end-June, China core brand POS stood at 5,076 (net −318 YTD) with average selling area 181 sqm (+16 sqm vs end-2025); 9th+10th generation stores account for c.75%. Kids POS 2,202 (net −162 YTD), average area 131 sqm. Super Premium Stores reached 188 globally (152 adult / 35 kids / 1 Cambodia), +61 vs end-2025; on track to reach 211 stores by end-2026. Mgmt. flagged store-level dispersion: outlet/low-rent units are largely profitable, street stores more challenged, malls roughly breakeven. From August, site selection is controlled more tightly at group level with profitability (not just sales productivity) as the KPI. Overseas POS totalled 1,167; retail sell-through +>80% and cross-border e-com +>140% YoY in 1H26, but still only a mid-single-digit sales mix; mgmt. guides about 4–5% of sales by end-2026 versus a 30%+ ambition over 3–5 years.

Conservative into 3Q26, valuation undemanding. July was pressured by weather/traffic. For 3Q26, we expect mid-to-high single-digit retail sell-through growth if Aug–Sep stay on plan after a soft July (similar to 2Q26). Nike (NKE.US)’s pullback of distributor e-com rights from 2027 is framed as an opportunity; 361 will not chase volume at the expense of e-com profitability. For FY26, we expect topline growth to remain high-single if 2H26 holds with stable NPM. Overall, 1H26 showed steady multi-category growth, highlighted with Super Premium store expansion and overseas acceleration. We continue to see 361 as a relative outperformer versus broader sportswear on value-for-money, lower-tier/mall-outlet coverage and store upgrades; share gains remain more volume than ASP. Valuation looks undemanding, as the stock trades at about 6-7x 2026E PE, with dividend yield of c.7% (45% payout)