Five Years of +17% Growth. EV/EBIT at 2.26×. ANTA Is at 20×.

The numbers from FY2025 are not ambiguous. Revenue grew +10.6%. Gross margin came in at 41.5%, exactly where it stood the year before and the year before that. Net cash on the balance sheet is RMB 3.78 billion. ANTA Sports, China's largest sportswear brand, is priced at 20 times EV/EBIT. 361 Degrees, the third-largest, is priced at 2.26 times. Those two data points share an industry. They do not share an explanation.

This is not a recent aberration. The gap opened after April 2026, when 361 Degrees completed a share placement to fund overseas expansion. The business did not change. The share count grew. The stock fell from HKD 7.25 to HKD 4.14. EV/EBIT compressed from 4.68 times to 2.26 times on the same earnings. The operating profit line moved in neither direction.

What 361 Degrees Does

361 Degrees is a sportswear company headquartered in Fujian, the same province that produced ANTA and several of China's other major athletic brands. It sells footwear, apparel, and accessories under the 361° label across four categories: professional sports, youth, outdoor, and an international line that operates in Southeast Asia and Europe.

The FY2025 results mark the fifth consecutive year of double-digit revenue growth. From FY2020 to FY2025, revenue compounded at 17.1% per year. In FY2023, growth reached +21%. The rate has moderated to +10.6% in FY2025 as the base grew larger. EBIT rose +12.1% in the same period. Net income attributable to shareholders reached RMB 1.31 billion, up +13.9%. Basic EPS grew +13.8% to RMB 63.3 cents. Earnings per share have outpaced revenue for two consecutive years.

The gross margin has been 41.5% for three consecutive fiscal years. That consistency is notable: most branded consumer companies see margin volatility from promotional cycles, input costs, and channel mix. 361 Degrees has shown none of it.

The balance sheet is unusually clean for a company at this valuation. Net cash is RMB 3.78 billion. Debt/EBITDA is 0.16 times. The current ratio is 3.34 times. The final dividend for FY2025 was HKD 31.7 cents per share. At HKD 4.14, that is a 7.7% yield. The payout ratio is 45% of net income, covered by operating cash flow.

Why the Price Fell

The stock peaked at HKD 7.25 in early 2026, following the FY2024 results announcement. In April 2026, 361 Degrees completed a two-step share issuance. Between April 27 and 30, a shareholder placed 100 million existing shares through UBS with six independent institutional investors. On May 7, the company allotted 100 million new shares at the same price: HKD 6.18. Net proceeds from the new-share tranche were approximately HKD 611 million, directed toward overseas expansion in Southeast Asia and Europe.

The placement price was HKD 6.18. The shares trade today at HKD 4.14, which is 33% below the price at which UBS placed them with six independent institutions two months ago. The institutions who bought the placement are, at current prices, sitting on paper losses. That creates overhang: shares placed without a lock-up can be distributed into any rally.

The second signal is the buyback. At the May 2026 AGM, shareholders approved a general repurchase mandate allowing the company to retire up to 10% of its issued shares. The company has not bought back a single share since. It holds RMB 3.78 billion in cash and a stock trading at 2.26 times EV/EBIT and 0.77 times book. The means are present. The intent, at this price, has not been demonstrated.

The placement added 200 million shares. It added no gross margin compression.

What the Price Has Not Processed

Three things are absent from the current valuation.

1. 01 The placement is a completed event. The 200 million shares have been issued. The dilution is in the share count and in every per-share metric. What the price has not processed is the business underneath those shares. Revenue at RMB 11.1 billion growing at double digits does not become less valuable because the company raised HKD 611 million to expand internationally. The capital is deployed. The question is whether it generates a return. That answer is not yet in any filing.
2. 02 The international segment is unquantified, not absent. 361 Degrees already operates in overseas markets. It does not yet disclose segment economics for the international line. The market is penalising the opacity, not the performance. When H1 FY2026 results arrive on August 18, 2026, they will show the first six-month revenue and margin picture that includes the deployment of this capital. That is the earliest date at which the international economics can be verified from a public document.
3. 03 The core China business has not decelerated on a margin basis. Gross margin at 41.5% in FY2025 is identical to FY2024 and FY2023. ROIC at 13% is above the cost of capital by any reasonable estimate for a Hong Kong-listed Chinese consumer name. The current price implies something structural has broken. Three consecutive fiscal years of identical gross margins suggest otherwise.

What the Business Is Worth

At HKD 4.14, you are paying 2.26 times 361 Degrees' annual operating profit to own the entire business, after netting out the RMB 3.78 billion in cash it holds. ANTA Sports, which operates in the same industry, is priced at 20 times. Li Ning at 12 times. Xtep at 10 times. The average across those three peers is 14 times.

The bear case applies a 50% compression to the operating profit and re-rates the stock to 8 times: below every peer in the group, on a structurally impaired earnings base. Even in that scenario, the implied price is HKD 5.78, which is 40% above today's price. The base case asks only for a partial recovery to 7 times, half the peer average, and produces HKD 8.60. Neither scenario requires the business to accelerate. Both require only that the price stops implying a business in structural decline when the accounts show the opposite.

The dividend yield of 7.7% accrues while the re-rating, if it occurs, takes place.

Risks We Are Not Downplaying

The Decision

Written at HKD 4.14 on June 29, 2026.

The thesis is a valuation trade. 361 Degrees is a profitable, net-cash, growing sportswear business with 41.5% gross margins and five years of double-digit revenue growth. The stock trades at 84% below the peer group average on EV/EBIT. That distance does not require a positive catalyst to close. It requires only that the market stops treating a structurally intact business as though something inside it broke.

The bear case prices 361 Degrees at 8 times EV/EBIT on a 50% EBIT compression, below every peer in the group, on an impaired earnings base, and the implied price is HKD 5.78. That is 40% above today's price. The downside in the scenario where the thesis is wrong is bounded by a balance sheet that holds 42% of market cap in cash.

Track live price and position performance → Scorecard

Three signals would change the conclusion: gross margin below 39% in the H1 filing; a second dilutive capital raise before the first one has shown a return; or an inventory write-down that confirms domestic sell-through has slowed. Until one of those appears, EV/EBIT went from 4.68 times to 2.26 times between April and June on the same earnings. One number changed. It was not the operating profit.

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