CITIC International lowered the target price for SHENZHOU INTL to 74.1 yuan, last year's performance was below expectations

Jiangyin International published a report indicating that SHENZHOU INTL (02313.HK) will have lower-than-expected performance in 2025, with gross profit margins under pressure. In 2025, the company's revenue is expected to grow by 8.1% year-on-year to RMB 31 billion, with a volume increase of about 9% and a slight decline in unit price. The annual gross profit margin is expected to decrease by 1.8 percentage points year-on-year to 26.3%, showing pressure; the decline in gross profit margin is mainly affected by rising labor costs, insufficient ramp-up efficiency at the new garment factory in Cambodia, and the sharing of some import tariffs in the U.S. market with customers in the second half of the year. The final net profit attributable to the parent company is expected to decrease by 6.7% year-on-year to RMB 5.83 billion, which is lower than the bank's expectations. The company guides that capacity is expected to achieve mid-single-digit growth in 2026, but points out that there is still uncertainty regarding gross profit margins.

The bank stated that considering SHENZHOU's guidance, it has adopted a more conservative revenue assumption, lowering the revenue forecast for 2026-2027 by 6-9%. At the same time, it has lowered the gross profit margin forecast, expecting the gross profit margin in 2026 to remain roughly flat year-on-year. Based on the above adjustments, the earnings forecast for 2026-2027 has been lowered by 15-18%. Based on a forecast price-to-earnings ratio of 16 times for 2026, the target price has been lowered to HKD 74.1, equivalent to a forecast price-to-earnings ratio of 16 times for this year. The rating is maintained at "Buy."