19 Mar 2019

Crosby Research: 361 Degrees (1361 HK/BUY): 361° Kids and the ecommerce segment maintains high growth

In FY18, the company’s revenue was up by only 0.6% to RMB5.2bn, with 2H18 sales down by 8.0% YoY due to 1) reduction in replenishment orders in 2H18 amid trade war uncertainties, and 2) structurally rescheduled the delivery time of some of its 2018 products. On the cost side, A&P was up by 10.0% YoY to Rmb557.3m with higher sponsorship and endorsement expenses and R&D expenses was up by 19.3% YoY to Rmb214.6m amid continual strengthening of product innovation and design. Together with a historical high effective tax rate of 46.5%, FX loss of Rmb82m (FY17: Rmb46m gain) and Rmb1.2m of AR impairment (FY17: nil), FY18 recurring NP was down by 6.4% YoY to Rmb384.2m.