• Reiterate Buy Entry – 3.3 Target – 4.3 Stop Loss – 2.8
  • 361 Degrees International Limited is a China-based investment holding company principally engaged in the manufacturing and trading of sporting goods, including footwear, apparel and accessories. The Company operates through two business segments. The 361 Degrees Products- Adults segment is engaged in the manufacturing and trading of adult sporting goods. The 361 Degrees Products-Kids segment is engaged in the trading of kids sporting goods. The Company is also engaged in the operation of gas stations through its subsidiaries.
  • Sportswear sector has definitely been one of the best performing sectors YTD as demand surged due to more people working out during COVID period and also due to the boycott movement against foreign brands. The Tokyo Olympics is the first international sports event since the COVID pandemic began early last year. The pent-up demand for watching and participating in the event will be much higher. As the location is in Japan, more spectators in China will be able to watch live games during Asian hours. Hence, interest is expected to translate into more consumption of domestic brands’ sportswears. 
  • Previously, the company announced that it completed final redemption of 7.25% senior unsecured notes due 2021. The notional value of the note is US$400mn. Moving forward, the company has no short-term debt pressure and will recognise lower interest expenditure. 
  • Based on the peers’ comparison, we think the company still has upside potential to catch up with the market leaders such as Anta Sports, Li Ning, and Xtep.

Updated market consensus of the estimated growth of EPS in FY21 and FY22 are 17.6% and 12.3% respectively, which translates to 13.5x and 12.0x forward PE. The current PE is 14.6x. Bloomberg consensus average 12-month target price is HK$2.57.

1361 HK (Source: Bloomberg)