The report from "The Big Banks" has lowered the target price for SHENZHOU INTL to 78 yuan, expecting a delay in the recovery of profit margins

HSBC Global Research report indicates that SHENZHOU INTL (02313.HK) will underperform expectations in the second half of 2025, primarily due to weakening revenue and profit margins. During this period, the gross profit margin fell by 1.5 percentage points to 25.6% compared to the first half, mainly due to insufficient domestic capacity utilization and the depreciation of the US dollar in the fourth quarter. Revenue growth was only 2.2%, reflecting weak domestic sales, Puma's inventory reduction, and continued decline in Flyknit sales.

The bank has postponed its profit margin recovery expectations to 2027, as short-term adverse factors outweigh the impact of improved capacity utilization, including input cost pressures, order visibility risks, tariff impacts, and pricing pressures.

As a result, the bank has lowered its 2026 gross profit margin forecast from 28.5% to 27%, reduced its revenue growth forecast from 7.7% to 5.8%, leading to a 7.7% downward adjustment in the 2026 net profit forecast, and a 3.9% downward adjustment in the 2027 net profit forecast. The target price has been reduced from HKD 86.6 to HKD 78, maintaining a "Buy" rating