社区

361 Degrees reported its 1H26 results on 18 Aug, with results in-line with our and market expectations. 1H26 revenue (+8% YoY), gross margin (41.8%) and NP (+8% YoY) are on track to reach its 2026 guidance of 8-10% YoY sales growth, 41-42% GPM and positive NP growth. Interim dividend payout was maintained at 45% as the company target.

1H26 sales grew by 8% YoY, with the adult segment (+9% YoY; footwear 6%, apparel 13%) outpacing the kids segment (7% YoY; footwear 12%, apparel 0%). GPM expanded by 0.3pp YoY to 41.8% (Adult: +0.1pp YoY, Kids: +0.8pp YoY). Core operating profit margin was slightly up by 0.2pp YoY to 17.7%, helped by saving on selling and distribution expenses (S&D expense ratio dropped by 0.7pp YoY).

Near-term. We expect 361’s outperformance compared to peers is likely to continue, as the company continues to benefit from the K-shaped consumption trend in China with value-for-money positioning providing more resilient performance. 1Q and 2Q27 trade fairs are being hosted by 361, and we think a high-single-digit% growth in its order book is visible. Weather in July has been unfavourable for the whole industry, but the company saw retail sales back to high-single-digit% since mid-July when the weather turned more favourable. Medium-to-long term. 1) We look for an improvement in product, channel and execution, with 361’s recent appointment of ex-Nike China VP of Sales Simon Men, and likely several more members joining from top-tier global brands; and 2) the company mentioned its 3–5-year target of overseas sales contribution to reach 30%+ (from current low-single-digit%). Drivers include penetrating overseas wholesalers, bringing up the wholesale discount and expansion by markets – visibility is yet to improve, but this could provide a long-term optionality.

What we recommend: While the sportswear industry faced challenges like lukewarm demand, unfavourable weather, increased marketing spend and leading global brands’ discounting in 2026, 361 outperformed others as its value-for-money brand positioning did not suffer as much from the above challenges, and its A&P spending ratio of 9-11%, despite it being the sponsor of the 20th Asian Games, provided more visibility on the bottom line. Given 361 is currently trading at 6x 2026/27E PERs with 8-10% sales growth and c.7-8% dividend yield, we think the risk/reward tilts towards the upside. We reiterate our Outperform (2) call and raise our 12M TP to HKD5.4 (from HKD4.7) based on 7.5x 12M PER (vs. previously 7x as 361 continues to deliver).