UBS has released a research report announcing the initiation of coverage on SHEIN-W (625.HK) with a Neutral rating and a target price of HK$42.

UBS noted that SHEIN has successfully built a differentiated global apparel e-commerce platform leveraging its Large-scale Automated Testing and Reorder (LATR) model, and long-term structural advantages remain intact. However, near-term earnings face policy headwinds.

With the European Union set to remove the small parcel tariff exemption in July this year and planning to impose an additional surcharge of 2 euros per item starting in November, the company's performance will come under significant pressure in the short term. More clear-cut recovery momentum is expected to emerge only in the second half of 2027.

On financial projections, UBS forecasts SHEIN's revenue growth will accelerate from 4% in 2026 to 10% and 9% in 2027 and 2028, respectively. Over the longer term, its adjusted net margin is expected to gradually recover to pre-tariff-shock levels of approximately 5.5% to 6%.

The bank predicts adjusted net profit of US$1 billion and US$1.6 billion for 2026 and 2027, corresponding to net margins of 2.4% and 3.3%. The 2026 profit forecast is broadly in line with market consensus, while the 2027 forecast is about 9% below the general market expectation.