Tianfeng Securities: Maintains "Overweight" rating on STELLA HOLDINGS, expands overseas base to optimize client portfolio

According to the Zhitong Finance APP, Tianfeng Securities has released a research report maintaining a "Buy" rating for Jiuxing Holdings (01836). Based on the performance in the first half of 2025, considering last year's high base effect and the operational efficiency after the new production capacity is put into operation, the profit forecast has been adjusted. It is expected that the net profits for 2025-2027 will be USD 160 million, USD 180 million, and USD 190 million (originally USD 180 million, USD 200 million, and USD 220 million); EPS will be USD 0.20, USD 0.21, and USD 0.23 (originally USD 0.22, USD 0.24, and USD 0.26). The company's current stable position is a direct result of its three-year plan (2023-2025). Under this plan, the company is improving its product category mix, diversifying and expanding its customer base, and optimizing its manufacturing base layout. According to this plan, the company has set two major profit targets: to achieve a 10% operating profit margin over the entire three-year period and a low double-digit annual growth rate in post-tax profits. Given that the company has exceeded these targets in 2023 and 2024, it is confident that it will achieve these goals by the end of 2025. Nevertheless, the company still faces short-term challenges in profitability in the first half of the year, mainly due to two factors. First, customers shipped about one million pairs of orders in advance in the first half of 2024 to capture the surge in demand during last year's European summer tourism peak before the Paris Olympics, resulting in a high base effect. Secondly, there are short-term operational efficiency issues related to increasing capacity in Indonesia and the Philippines, where local labor productivity has not yet reached optimal levels. To meet demand and ensure the achievement of important customer goals, the company has shifted some production to a shoe factory in Vietnam, leading to increased costs, including overtime expenses. Although the initial situation encountered is not ideal, the company expects conditions to gradually improve in the second half of the year. Importantly, as the company is about to finalize its next three-year plan (2026-2028), it remains on a continuous growth trajectory. Part of this plan includes the company's intention to expand total production capacity by an additional 20,000,000 pairs starting this year. This will be achieved by further enhancing the capacity of the new factory in Solo, Indonesia, launching operations at the second factory in Bangladesh, and accelerating the construction of a dedicated factory in Indonesia for the company's largest sports customer. Another focus of the company's next three-year plan is to develop its handbag and accessories manufacturing business, which the company plans to establish as a significant long-term growth driver. Recently, the company has completed the acquisition of a small but experienced handbag factory in Vietnam. The company will leverage its expertise to enhance the product quality and production efficiency of its overall handbag business. Once finalized, the company's next three-year plan will enable it to capture the cross-product category demands of brand customers. As more companies reassess their supply chains and consolidate suppliers, the company's goal is to become the ideal partner to meet their needs—combining high-quality standards with added value