[ET Net News Agency, 18 January 2018] Goldman Sachs lifted its target price for
Shenzhou International Group Holdings (02313) to HK$88 from HK$81 on updated earnings and
a roll forward of its valuation base to 2019, and maintained its "buy" rating (on
conviction list).
The research house sees Shenzhou as a winner in the industry consolidation trend given
its superior cost efficiency and efforts on product/efficiency upgrade. In 2H 2017,
Goldman expects its sales/OP growth of 15%/15%, slower than 1H 2017's 19%/18% due to
unfavorable FX. But net income growth should achieve 29% yoy in 2H 2017 versus 24% in 1H
2017 thanks to lower effective tax rate and financing costs.
Looking into 2018, Goldman estimated volume growth of 14% yoy, mainly driven by
expansion in Vietnam and efficiency upgrade in China. While FX trends remains volatile,
efficiency upgrade should support its mid-term margin expansion. On top of this, better
client portfolio (Uniqlo and Nike should serve as growth drivers in 2018) and market share
gains should lead to better order visibility for Shenzhou over other OEMs. Thus, Goldman
estimated 17%/18% operating profit/net income yoy growth in 2018. (KL)