BOCOM INTL: Lower target price for SHENZHOU INTL (02313) to HK$74.1, last year's performance falls short of expectations.

BOCOM International released a research report stating that, considering the guidance from SHENZHOU INTL (02313), they have adopted a more conservative revenue assumption, leading to a downward adjustment of 6-9% in revenue forecasts for 2026-2027. They have also revised down the gross profit margin forecast, expecting the gross profit margin in 2026 to remain roughly the same compared to the previous year. Based on these adjustments, they have lowered profit forecasts for 2026-2027 by 15-18%. Maintaining the target price at 74.1 HKD, based on a forecasted P/E ratio of 16 times for 2026, and maintaining a "buy" rating. The bank pointed out that SHENZHOU INTL's performance in 2025 was lower than expected, with pressure on gross profit margin. The company's revenue in 2025 increased by 8.1% year-on-year to 31 billion RMB, with volume increasing by about 9% and unit price slightly declining. The gross profit margin for the full year decreased by 1.8 percentage points to 26.3% year-on-year, showing pressure; the decline in gross profit margin was mainly due to factors such as rising labor costs, inefficiencies in the new garment factory in Cambodia, and the company sharing some of the import tariffs in the US market with customers in the second half of the year. The net profit attributable to shareholders decreased by 6.7% year-on-year to 5.83 billion RMB, below the bank's expectations. The company guided that production capacity is expected to achieve low single-digit growth in 2026, but pointed out that there is still uncertainty regarding the gross profit margin.