Daiwa: After adjustment, Jiuxing's interim net profit should grow by 2% year-on-year, target price raised to 20 yuan

Daiwa report indicates that Jiuxing (01836.HK) had a mid-term net profit of USD 78.6 million, compared to market expectations of USD 75.8 million. After deducting a one-time expense of USD 7 million related to increased production issues in Indonesia and the Philippines, the net profit should be USD 85.6 million, a year-on-year decline of 7%. The firm noted that last year, 1 million pairs of shoes were shipped early in the first half, creating a high base effect. Further deducting the related impact (estimated at USD 8 million), the company's mid-term net profit should actually increase by 2% year-on-year.

The firm stated that based on the company's annual additional profit distribution of USD 60 million, unless the company uses the relevant funds for buybacks, the dividend yield is expected to reach 10 cents in the next two years, which is very attractive. The firm expects the company to disclose a three-year net profit growth plan when announcing third-quarter results, estimating a compound annual growth rate target of high single digits from 2026 to 2028.

The firm has lowered its earnings per share forecast for the company for the next two years by 2% to 5%, reflecting the impact of the company's factory production increase events and temporary tariff support provided to designated customers. The target price has been raised from HKD 17 to HKD 20, which is 12 times the average annual earnings per share forecast for the next two years, maintaining a "Buy" rating