[ET Net News Agency, 7 August 2019] Morgan Stanley lifted its target price for Shenzhou
International Group Holdings (02313) to HK$120 from HK$105 and maintained its "overweight"
rating.
The research house said Shenzhou structurally is one of the most exposed OEMs to
sportswear servicing top global brands including Nike, Adidas, and Puma while also
obtaining more orders from top China domestic brands such as ANTA and Li Ning, placing it
in a strong position within the sportswear supply chain.
Morgan thinks the company can benefit from better ASP from major customers such as
Adidas in 2019 as customers are securing capacity, along with further efficiency
improvements, particularly in overseas factories, driving 14% top-line growth YoY (despite
further winding down its retail business).
Although 1H GPM will have to grow against a high base and there is some expense pressure
from social insurance premiums, Morgan still expects Shenzhou to expand GPM by 1.0ppt and
OPM by 2.0ppt in 2019. Morgan is looking for the company to grow earnings by 21% in 2019.
With full-year contribution from the Vietnam garment factory phase II and partial help
from the new Cambodia plant in 2020, Morgan expects both of Shenzhou's top-line and
earnings growth to accelerate, growing at 17% and 23%, respectively. (KL)