Breaking Down 361 Degrees International Limited Financial Health: Key Insights for Investors

Understanding 361 Degrees International Limited Revenue Streams

Revenue Analysis

361 Degrees International Limited operates primarily within the sportswear industry, generating revenue through a mix of products and services. The company’s revenue streams can be dissected into three main categories: footwear, apparel, and accessories.

Understanding 361 Degrees International Limited’s Revenue Streams

• Footwear: In 2022, footwear sales accounted for approximately 58% of total revenue.
• Apparel: Sales from apparel contributed around 30% to overall revenue in the same year.
• Accessories: Accessories generated about 12% of total revenue in 2022.

Geographically, the majority of revenue comes from the Chinese market, which represented approximately 80% of total revenue in 2022. Other markets include Southeast Asia and Europe, which combined accounted for the remaining 20%.

Year-over-Year Revenue Growth Rate

Looking at historical trends, 361 Degrees has shown a fluctuating revenue growth rate over the past few years:

This data indicates that the company’s revenue has steadily increased from RMB 3 billion in 2020 to a projected RMB 4 billion in 2023, reflecting a positive growth trajectory.

Contribution of Different Business Segments to Overall Revenue

Examining the segment contribution further:

Analysis of Significant Changes in Revenue Streams

In 2022, 361 Degrees experienced a notable increase in footwear sales, attributed to successful marketing campaigns and new product launches. Additionally, the company has been expanding its e-commerce presence, which has positively influenced apparel sales. Conversely, revenue from accessories has seen stagnation, indicating a potential area for growth and development.

In comparison to previous years, the company’s shift towards direct-to-consumer sales channels has begun to yield results, enhancing overall revenue stability and growth potential.

A Deep Dive into 361 Degrees International Limited Profitability

Profitability Metrics

Analyzing the profitability of 361 Degrees International Limited provides valuable insights into its financial health. Key metrics include the gross profit margin, operating profit margin, and net profit margin, each reflecting the company's ability to generate profit relative to its revenue.

Gross Profit, Operating Profit, and Net Profit Margins

As of the latest financial reports, 361 Degrees International Limited has demonstrated the following profitability metrics:

Trends in Profitability Over Time

Over the past few years, 361 Degrees has exhibited a steady improvement in its profitability metrics. The gross profit margin has increased from 30.7% in 2021 to 34.5% in 2023. This positive trend suggests enhanced pricing power and effective cost management.

The operating profit margin also reflects improvement, climbing from 9.9% to 12.8% within the same period. Meanwhile, the net profit margin saw an increase from 7.8% to 9.6%, indicating a stronger bottom line as the company manages its expenses effectively.

Comparison of Profitability Ratios with Industry Averages

When compared to industry averages, 361 Degrees International Limited's profitability ratios appear competitive:

Analysis of Operational Efficiency

The company's operational efficiency has improved significantly. Cost of goods sold (COGS) management has been a focal point, contributing to the rising gross margins. In 2023, COGS was reported at 65.5% of revenue, compared to 67.9% in 2022.

Additionally, the trend in gross margin reflects effective cost management strategies. From 2021 to 2023, gross margin increased by approximately 3.8 percentage points, indicating a robust approach to enhance operational efficiency.

In conclusion, 361 Degrees International Limited showcases a solid profitability framework, characterized by increasing margins and strong operational efficiency. These factors make it an appealing option for investors looking for companies with sustainable profit growth.

Debt vs. Equity: How 361 Degrees International Limited Finances Its Growth

Debt vs. Equity Structure

As of the end of Q2 2023, 361 Degrees International Limited has demonstrated a notable balance between its debt and equity financing, crucial for maintaining operational flexibility. The company reported a total long-term debt of approximately ¥1.5 billion and a short-term debt of around ¥300 million, resulting in total debt of ¥1.8 billion.

The debt-to-equity ratio stands at 1.2, implying that for every ¥1 of equity, the company has ¥1.2 of debt. This figure is slightly above the industry average of 1.0, indicating a heavier reliance on borrowed funds compared to peers in the sporting goods industry.

In recent months, 361 Degrees has engaged in refinancing activities, successfully issuing corporate bonds worth ¥500 million at a fixed interest rate of 4.5%. The company’s credit rating, as assessed by major credit agencies, remains stable at BB+, reflecting a moderate level of risk associated with its debt profile.

To maintain a healthy financial structure, 361 Degrees International Limited seems to balance its financing strategies effectively. The company has utilized debt financing to fund its expansion initiatives while simultaneously issuing equity to bolster its capital base during periods of growth. In the last fiscal year, equity financing represented 30% of total financing, while debt accounted for 70%.

This strategic approach not only enhances liquidity but also allows the company to invest in product development and market expansion, crucial for sustaining competitive advantage in the dynamically evolving retail landscape.

Assessing 361 Degrees International Limited Liquidity

Liquidity and Solvency

Analyzing 361 Degrees International Limited's liquidity is vital for understanding its financial stability and operational efficiency. Key indicators such as the current ratio and quick ratio provide insights into the company's short-term financial health.

The current ratio, which measures the ability to cover short-term liabilities with short-term assets, is calculated as follows:

The quick ratio, a more stringent measure of liquidity, excludes inventory from current assets. This ratio is particularly important in assessing liquidity risk.

These ratios suggest that 361 Degrees possesses a solid liquidity position, with the current ratio above the ideal benchmark of 1.0, indicating that the company can meet its short-term obligations comfortably.

Working capital is another critical aspect to consider. The working capital, calculated as current assets minus current liabilities, reflects the company's operational liquidity. For 2022, 361 Degrees International Limited reported:

This positive working capital of ¥800 million illustrates the company's ability to finance its day-to-day operations effectively.

Analyzing the cash flow statements reveals critical insights into how the company generates cash across its operating, investing, and financing activities:

The positive cash flow from operating activities of ¥700 million indicates robust earnings from core business operations. However, the negative cash flows from investing and financing activities suggest that the company is investing heavily in growth and returning capital to shareholders, which could raise concerns about potential liquidity strains in the future.

In summary, while 361 Degrees International Limited shows strong liquidity fundamentals and positive working capital, the trends in cash flows from investing and financing need careful monitoring to assess any potential liquidity risks moving forward.

Is 361 Degrees International Limited Overvalued or Undervalued?

Valuation Analysis

When assessing the financial health of 361 Degrees International Limited, it’s essential to analyze various valuation metrics. Investors typically rely on ratios like Price-to-Earnings (P/E), Price-to-Book (P/B), and Enterprise Value-to-EBITDA (EV/EBITDA) to determine whether a stock is overvalued or undervalued.

Price-to-Earnings (P/E) Ratio

As of the latest financial data, 361 Degrees International Limited has a P/E ratio of 14.5. This is in comparison with the industry average P/E of 18.0, suggesting that the company might be undervalued in the context of its earnings multiple.

Price-to-Book (P/B) Ratio

The P/B ratio for 361 Degrees stands at 2.1, which is lower than the industry average of 2.5. This indicates that the market is valuing the company's book assets more favorably than its peers.

Enterprise Value-to-EBITDA (EV/EBITDA) Ratio

The current EV/EBITDA ratio for the company is reported at 7.3, while the industry average is approximately 9.0. This suggests lower valuation relative to the company's earnings before interest, taxes, depreciation, and amortization.

Stock Price Trends

Over the past 12 months, 361 Degrees International Limited experienced a significant variance in stock prices. The stock started at HKD 5.50 and fluctuated to a high of HKD 7.20, before recently being priced at HKD 6.80, reflecting a 23% increase year-over-year.

Dividend Yield and Payout Ratios

The company has a dividend yield of 3.5%, with a payout ratio of 30%. This suggests a sustainable approach to returning value to shareholders while retaining enough earnings for future growth.

Analyst Consensus

Analysts covering 361 Degrees International Limited have a consensus rating of “Hold”. The weighted average price target based on these recommendations is HKD 7.00, indicating moderate expectations based on current valuations.

Key Risks Facing 361 Degrees International Limited

Key Risks Facing 361 Degrees International Limited

361 Degrees International Limited operates in the competitive sportswear industry, which is influenced by various internal and external risk factors impacting its financial health.

Industry Competition: The sportswear market is characterized by intense competition. Major players such as Nike, Adidas, and Puma dominate the market. According to a report by Statista, the global athletic apparel market is expected to reach approximately USD 350 billion by 2025, growing at a CAGR of 8.1%. This growth invites not only established brands but also new entrants, putting pressure on 361 Degrees’ market share.

Regulatory Changes: Compliance with international trade regulations, labor laws, and environmental standards represents an ongoing challenge for 361 Degrees. The company must adapt to changes in regulations which can impact costs. For example, the introduction of stricter environmental regulations could potentially lead to increased manufacturing costs, affecting profitability.

Market Conditions: Fluctuations in consumer spending power, influenced by macroeconomic conditions, can affect sales volume. In 2022, China's retail sales growth was reported at 1.6%, significantly decelerating from 12.5% in the previous year, indicating a cautious consumer environment that may persist.

Operational Risks: Production disruptions due to supply chain issues have heightened in recent years. The COVID-19 pandemic exposed vulnerabilities in global supply chains, leading to delays and higher costs. 361 Degrees reported a 15% increase in logistics costs in its latest quarterly report as a result.

Financial Risks: The company faces risks related to currency fluctuations, especially since it operates in multiple markets. For instance, the depreciation of the Chinese Yuan against the US Dollar could impact profitability for exported goods. In Q2 2023, currency fluctuations resulted in an approximate 3% reduction in revenue when converted to USD.

Strategic Risks: The company’s reliance on a limited number of suppliers for key materials can be a risk. A disruption with a major supplier could hinder production capabilities. As of the end of 2022, approximately 65% of raw materials were sourced from five key suppliers.

Mitigation Strategies: 361 Degrees is implementing diversification strategies to alleviate supply chain risks. The company aims to increase its supplier base by 20% over the next two years. Additionally, investment in technology to streamline operations is also planned to improve efficiency and cut costs.

Understanding these risks is crucial for investors looking to gauge the stability and growth potential of 361 Degrees International Limited in a rapidly evolving market landscape.

Future Growth Prospects for 361 Degrees International Limited

Future Growth Prospects for 361 Degrees International Limited

361 Degrees International Limited, a prominent player in the athletic footwear and apparel industry, exhibits several growth opportunities that can significantly enhance its financial health. The following highlights key growth drivers and strategic initiatives that are expected to propel future revenue growth.

Key Growth Drivers

• Product Innovations: In 2022, 361 Degrees launched the 'Fifth Dimension' running shoe line, which has seen a remarkable sales increase of 35% in the first quarter of 2023 compared to the previous year.
• Market Expansions: The company has successfully entered the Southeast Asian market, contributing to an estimated 15% growth in regional sales for the fiscal year ending 2023.
• Acquisitions: The acquisition of a local footwear manufacturer in early 2023 is expected to enhance production efficiency, projected to reduce costs by 10% in the coming fiscal year.

Future Revenue Growth Projections and Earnings Estimates

Analysts project that 361 Degrees will achieve a revenue growth rate of 20% annually over the next three years, bolstered by its expanding product range and market footprint. The company’s earnings before interest and taxes (EBIT) is estimated to reach CN¥500 million by the end of FY 2025, representing a significant increase from CN¥300 million in FY 2022.

Strategic Initiatives and Partnerships

• Partnerships with E-commerce Platforms: In 2023, 361 Degrees expanded its collaboration with Alibaba, which is anticipated to increase online sales by 25% year-over-year.
• Focus on Sustainability: The introduction of eco-friendly materials in production aims to align with the growing consumer demand for sustainable products, projected to capture an additional 10% market share by 2024.

Competitive Advantages

361 Degrees holds several competitive advantages that enhance its position for growth:

• Brand Recognition: The brand has established strong recognition in China, with a market share of 10% in the domestic sportswear sector.
• Cost Efficiency: The company's vertically integrated supply chain allows for cost-effective production, yielding a gross profit margin of 40%.

Overall, 361 Degrees International Limited is well-positioned to leverage its growth opportunities, backed by innovative products, strategic expansions, and strong market presence, setting a robust framework for future financial performance.