Xiaomo: It is expected that Shenzhou International (02313) orders will resume in the second half of the year and reduce the target price to HK$60

The Zhitong Finance App learned that J.P. Morgan Chase released a research report saying that it is expected that Shenzhou International (02313)'s revenue will gradually improve in the second half of the year, and profits will generally stabilize before a significant recovery in 2027, but the rate of gross margin recovery is still a key changing factor; the bank lowered the target price from HK$70 to HK$60. The company's current price corresponds to 9 times the projected price-earnings ratio in 2027, plus the mid-term dividend payout ratio of 61.5%. If orders recover as expected and gross margin gradually normalizes, risk and return will attract risk and return, maintaining an “increase in holdings” rating.

The forecast anticipates that the company's order momentum will improve sequentially in the second half of the year, thanks to continued Adidas and Uniqlo momentum, the narrowing of Nike and Puma's decline, the steady and positive growth of mainland brands such as Anta Sports (02020) and Li Ning (02331), contributions from new customers such as ALO, and low base effects.

The bank expects revenue growth of 2% year on year in the second half of the year, down 5% from the first half of the year, but due to continued pressure on gross margin, profit is expected to drop 4% year on year; and sales and profit are expected to increase by 5% and 14% respectively in 2027.