Daiwa downgraded the target price of SHENZHOU INTL to 73 yuan, with gross margin in the second half of the year disappointing expectations

Daiwa published a research report stating that SHENZHOU INTL (02313.HK) will underperform expectations in the second half of 2025, with revenue growing 2.2% year-on-year and gross margin declining by 1.8 percentage points to 25.6%, marking a two-year low, which is significantly below the market's expectation of a generally stable gross margin. The bank estimates that the lower-than-expected gross margin is mainly due to tariffs, the appreciation of the Renminbi, as well as rising labor costs and inefficiencies.

Looking ahead to 2026, the bank noted that order momentum remains weak from January to February, but improved in March. The bank expects annual sales volume to grow in the mid-single digits year-on-year, while the average selling price is expected to decline slightly year-on-year due to the appreciation of the Renminbi and ongoing adjustments by Nike and Puma.

Despite short-term adverse factors, based on the company's current valuation being not expensive, the bank reiterated its "Buy" rating, lowering the target price from HKD 79 to HKD 73