Morgan Stanley lifted its target price for Shenzhou International Group (02313) to HK$160 from HK$140 and maintained its "overweight" rating.
Due to low visibility, the research house was expecting Shenzhou to grow its 2H revenue by 1%, especially given that the pace of order recovery from sports brands was uncertain. With 3Q now concluded, along with upstream Taiwanese sportswear OEMs' sequential improvement in monthly sales trends indicating a gradual pickup in sports apparels' order strength, Morgan believes Shenzhou's overall capacity and shipment ramp-up will track better than the research house's prior forecasts.
Morgan now expects Shenzhou's revenue to rise 4-5% in 3Q and 9-10% in 4Q, bringing its 2H revenue to be up 8%. It also expects Shenzhou's 2H operating margin to expand to 24%, up 1.4ppt. All told, Morgan expects Shenzhou's 2H net income to be up 12%.
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