CMSC: From Proprietary Operations to a Platform Dual-Engine Model, Initiates SHEIN-W (00625) with "Strong Buy" Rating

CMSC issued a research report stating that SHEIN-W (00625) is the world's largest online fashion retail company, which started as a proprietary operation and gradually expanded into a third-party platform model as a new growth driver. The company pioneered a large-scale automated small-batch rapid-replenishment model, empowering small and medium-sized apparel manufacturers, and uses algorithms to build an efficient and fast-response supply chain, addressing pain points in the traditional industry. It is estimated that the company's adjusted net profit for 2026-2028 will be US$1.22 billion, US$1.89 billion, and US$2.17 billion, respectively. The report initiates coverage with a "Strong Buy" rating. CMSC's main views are as follows: SHEIN is the world's largest online fashion retail company, using algorithms to organize its supply chain and providing products and services to approximately 273 million active customers across 160 global markets. The company was founded in 2012, launched its main brand SHEIN in 2013, pioneered the "Large-scale Automated Test-and-Reorder (LATR)" model in 2014, and officially launched its third-party marketplace (platform) model in 2023. In 2025, the company's revenue was US$41.85 billion (up 8% year over year), of which 89% came from product revenue, 60% came from Europe and the United States, and 64% came from the apparel category; net profit was US$2.06 billion (down 39% year over year), and adjusted net profit excluding the impact of changes in the fair value of preferred shares was US$1.82 billion (up 62% year over year). Pioneering the LATR model to build an efficient supply chain SHEIN pioneered the LATR model, effectively resolving the industry's trilemma and achieving a balance among product selection diversity, design launch speed, and inventory management efficiency. As of 26Q1, the company's products included more than 2 million apparel styles, and consumers could discover an average of 4,700 new styles per day in Q1. It can quickly launch first orders in small batches and complete replenishment within as fast as 5 days. (1) Front-end supply: empowering small and medium-sized apparel manufacturers to ensure rapid-response efficiency. The successful operation of the LATR model allows intelligent supply chain upgrades, sales scale advantages, and retail-end user feedback to feed back into upstream suppliers to reduce costs and improve efficiency. (2) Back-end fulfillment: accelerating overseas warehouse construction to mitigate risks & optimize fulfillment timeliness. The era of tax exemption for cross-border small parcels in Europe and the United States has ended, making overseas warehouse construction inevitable. The company continues to build local warehouses around the world, gradually shifting from cross-border direct mail to an overseas warehouse + local fulfillment model. As of June 30, 2026, overseas warehouses accounted for 32% of the company's warehouses, and more than 90% of orders were delivered within 10 working days after shipment. Cross-border e-commerce industry Online penetration continues to rise, and platforms are positioned differently. The global market is US$4.6 trillion, but many regions still have considerable room for e-commerce penetration to increase; among them, fashion is the category with the largest online sales scale. In terms of competitive landscape, traditional comprehensive platforms such as Amazon still have scale advantages, while emerging platforms rapidly acquire customers through price competitiveness, category focus, and user focus. Global fashion industry The market space is broad and the landscape is fragmented, and SHEIN has entered the global top tier. The global market is US$1.74 trillion, and online penetration has risen to 35%; during the same period, the industry landscape is highly fragmented, with SHEIN ranking third with a 1.9% share. Compared with traditional fast-fashion brands, SHEIN focuses on young female customers and uses an online DTC + LATR model to achieve advantages in high gross margin and high turnover. Risk warnings: risks of intensified industry competition, changes in tariffs and trade policies, compliance risks in overseas operations, supply chain and inventory risks, etc.