Goldman Sachs raised its target price for Zhongsheng Group (00881) to HK$100 from HK$75.7 and maintained its "buy" rating.
The research house believes Zhongsheng is commencing an age of unprecedented business accelerations. Each of its core brands is set to drive milestone product launch and/or network expansion via Zhongsheng's market leadership, and the company is having multiple new opportunities to drive economies of scale in sell-through efficiency inventory/margin) and cost savings (financing expense/access to capital).
Goldman modeled Zhongsheng's earnings to accelerate from 10% in 1H to 35% in 2H, and 35% in 2021. It raised its 2020-23 net profits forecasts by +2%/+5%/+15%/+25% to reflect better revenues and operating leverage where Zhongsheng's brand portfolio captures the tailwinds of market consolidation within the luxury segment, together with its ability to drive economies of scale on both revenue and cost side.
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