360 Degrees To Open The Road Of Brand Remodeling, The Potential For Transformation Can Be Expected.

With the upsurge of domestic fitness and the demand driven by infrastructure improvement, there is still plenty of room for long-term growth of sporting goods manufacturers. In the face of the escalating consumption trend, local sports brands are gradually trying to diversify their brand upgrading routes. Among them, the 31st degree (01361) of Hong Kong stock market has also opened the way of brand remodeling in the near future.

Leading sporting goods brand in China

321 degrees is in the leading position in the domestic sporting goods brand market. At present, it has 331 degree brand, 360 degree children's clothing and ONE WAY brand, aiming at the domestic mass market, children's sports and high-end outdoor sports market. By the end of 2018, the group had 5539 core brand stores, about 74% of which were located in three or below cities in China, while 7.4% and 18.6% stores were located in China's first tier and second tier cities respectively. The company focuses on the mass professional movement and has the leading commodity development capability. Now the company has obtained 335 patents, and the R & D expenditure in 2018 accounted for 4.1% of the total turnover.

Affected by macroeconomic factors and external factors, the company's performance in 2018 fluctuated considerably. In 2018, the annual operating income of the company was 5 billion 187 million yuan, an increase of 0.56% over the same period last year, with a profit of 782 million yuan and a decrease of 20.8% compared with the same period last year. In terms of business, the company's children's clothing business is classified as 15.7% and 1.6% of the total revenue of other children's sales, respectively. The remaining 82.7% revenue is mainly contributed by the core brand products, overseas and e-commerce business, which is basically stable compared with previous years.

　　 Brand remodeling plan

In the development strategy, we are committed to promoting the internationalization, youth and high-end of our brand. Since its inception, the company has been sponsoring all kinds of sports events, sponsoring the three Asian Games of Guangzhou, Inchon and Jakarta, and becoming the official partner of the 2014 World Youth Olympic Games and Rio Olympic Games, and the international layout is also constantly improving. Last year, 360 degrees also entered into cooperation with the Indonesian sun department store, and entered the Indonesian market by the East Asian Games, further promoting the internationalization of the brand, continuing to expand overseas markets, and bringing new business growth points. In addition, in 2018, 31st degree as the first sporting goods competition strategy in the country, attracting new consumer groups with new categories such as competition clothing.

At the time of listing 10th anniversary, the company recently launched the "brand remolding" plan aimed at improving brand image. The brand remolding strategy will start from the basketball series products. It is expected that the product will be listed in the 1 quarter of 2020, and will benefit greatly the company's future development of high-end brand matrix, and it is also expected to bring about a profit increase.

The current market is expected to pick up the performance of Hong Kong stocks in the second half of the year, plus the recent management buyback, which will provide strong support for the company's share price in the short term. Considering that since the beginning of the year, a number of new policies to promote sports consumption have been launched in China, and the effect will gradually appear. If the company can get through the brand remolding period, the performance in the medium and long term will be significantly improved. Investors can consider the phased layout, and the stock price can expect HK $1.8 and fall below HK $1.3.