Intrinsic Value 361 Degrees International Limited (1361.HK)

• Previous Close: HK$5.75
• Intrinsic Value: HK$13.65
• Upside potential: +137%

Stock Valuation Context

Business Model And Market Position

361 Degrees International Limited is a prominent Chinese sportswear manufacturer and retailer operating within the highly competitive consumer cyclical sector. The company's core revenue model is built on the design, production, and wholesale distribution of athletic footwear, apparel, and accessories under its 361° core and 361° Kids brands. It generates sales through an extensive network of over 5,270 physical retail stores, major e-commerce platforms like Tmall and JD.com, and its proprietary website. The firm operates in a market dominated by larger global and domestic players, positioning itself as a value-focused alternative for mass-market consumers in China. Its strategic focus on both adult and children's segments provides diversification, while its integrated operations, including sole manufacturing, offer some control over its supply chain. The company maintains a distinct identity in China's crowded sportswear landscape by leveraging its national brand recognition and extensive distribution reach.

Revenue Profitability And Efficiency

The company reported robust revenue of HKD 10.07 billion for the period, demonstrating significant scale in its operations. Net income reached HKD 1.15 billion, translating to a healthy net profit margin of approximately 11.4%. This indicates effective cost management and pricing power within its competitive market segment, supporting its overall financial sustainability.

Earnings Power And Capital Efficiency

Diluted earnings per share stood at HKD 0.56, reflecting the company's ability to generate profits for its shareholders. Operating cash flow was positive at HKD 69.8 million, though significantly lower than net income, suggesting some working capital movements. Capital expenditures of HKD 268.7 million indicate ongoing investment in maintaining and expanding its retail and operational infrastructure.

Balance Sheet And Financial Health

The company maintains a strong liquidity position with cash and equivalents of HKD 4.25 billion. Total debt is minimal at HKD 264.5 million, resulting in a very conservative debt-to-equity structure. This pristine balance sheet provides significant financial flexibility and resilience against market downturns or strategic investment opportunities.

Growth Trends And Dividend Policy

The company demonstrates a shareholder-friendly approach through its dividend policy, distributing HKD 0.41 per share. This represents a substantial payout ratio, indicating a commitment to returning capital to investors. The balance between reinvestment for growth and consistent dividend distributions reflects a mature yet stable operational phase.

Valuation And Market Expectations

With a market capitalization of approximately HKD 12.26 billion, the market values the company at a price-to-earnings multiple derived from its current earnings power. A beta of 0.305 suggests the stock is significantly less volatile than the broader market, indicating perceived stability and defensive characteristics by investors.

Strategic Advantages And Outlook

The company's key advantages include its strong brand recognition in China, extensive retail distribution network, and focus on the value segment. Its dual-brand strategy targeting both adults and children provides market diversification. The outlook remains tied to domestic consumer spending trends and its ability to compete effectively in China's dynamic sportswear market.

Sources

Company Annual ReportHong Kong Stock Exchange Filings