Goldman Sachs: First Hiying-W (00625) “buy” rating target price of HK$62, optimistic about potential profit recovery in 2027

The Zhitong Finance App learned that Goldman Sachs released a research report stating that it covered Xiyin-W (00625) for the first time and gave it a “buy” rating. The target price for 12 months was HK$62, based on the 2027 forecast price-earnings ratio of 18 times, excluding cash, and the price-earnings ratio was 8.7 times, targeting the global fashion and apparel industry. The bank believes that SHEIN (SHEIN) has strong cash balances, free cash flow generation capacity, potential profit recovery in 2027, room for upward market share, and attractive valuations. The current pressured valuation reflects market expectations that the company will continue to consume cash. Its market value of US$18 billion is only equivalent to 118% and 104% of the projected cash balances for the first half of 2026 and 2027, respectively. The bank believes that market expectations are overly pessimistic.

Goldman Sachs predicts that SHEIN's revenue will drop 1% year-on-year this year, and adjusted net profit will drop to 1.4 billion US dollars, and 1.8 billion US dollars in 2025. However, as the impact of tariffs normalizes, market share continues to rise, freight pressure eases, and operational efficiency improves, revenue growth is expected to return to 10% from 2027 to 2028, and adjusted net profit will rise to 1.9 billion and 2.3 billion US dollars, respectively. Despite tariff and trade-related uncertainties and high oil prices, SHEIN recorded an adjusted net profit margin of 2.9% to 5.1% from 2023 to 2025. The bank expects the adjusted net profit margin to return to 4.6% by 2028, with an average free cash flow to sales ratio of 3.5% to 5.5% from 2026 to 2028.

Under a pessimistic scenario, if revenue falls 5% year over year and oil prices remain at $85 to $90 per barrel, SHEIN may record losses of 400 million to 655 million US dollars in 2027. The reason is that fulfillment costs are variable costs, but other operating expenses are fixed.

Goldman Sachs believes that SHEIN's market share in the global fashion market in 2025 will be 1.9%. Although the company is already the world's largest online fashion retailer, there is still room to increase its market share by deepening regional penetration and expanding the product portfolio and price range in the scattered global fashion market. Its end-to-end digital supply chain and proprietary LATR system should provide advantages in product breadth, design update speed, and inventory efficiency. In terms of risk, the bank pointed out that the main risks include further imposition of tariffs, ESG and regulatory risks, slowing growth and increased competition, supply chain concentration risks, and cost inflation.