According to Zhitong Finance APP, CICC released a research report stating that considering the optimization of shareholding structure and the continuous release of positive developments in the robotics industry, the firm raised SHOUCHENG's (00697) target price by 21% to HK$3.3 per share, representing 30% upside from the current stock price, corresponding to 2.8x 2025 P/B ratio, while maintaining an outperform rating. This P/B multiple may still be conservative relative to the premium multiple of the company's current industrial investment fair value over book value (cost method). The company trades at 2.1x 2025 P/B.

CICC's main views are as follows:

**Event** On September 25, Chow Tai Fook Enterprises announced its plan to issue HK$2.218 billion 0.75% exchangeable bonds due 2028, with the exchange property being approximately 10.0% of SHOUCHENG's issued share capital held by the company. Upon completion of the transaction, Chow Tai Fook Enterprises will exit its investment in SHOUCHENG. On the same day, SHOUCHENG also announced this matter simultaneously.

**Further Optimization of Shareholding Structure** The firm views this transaction as an important opportunity for SHOUCHENG to further optimize its shareholding structure. Before 2025, a major characteristic of SHOUCHENG's shareholding structure was the relatively high proportion of industrial investors compared to financial market institutional investors, and the relatively high proportion of long-term capital compared to short-term capital, which once suppressed stock liquidity and the entry of new institutional investors.

Since entering 2025, the company has made multiple moves to continuously improve free float, including issuing US$180 million convertible bonds to overseas investors in the second quarter, and conducting a HK$600 million rights offering in early September. While the previous two operations caused some dilution to the company's equity, this exit by Chow Tai Fook Enterprises only involves share exchange without additional issuance.

After completion of this transaction, the firm believes the company's effective free float ratio (excluding some industrial and strategic investors who rarely engage in secondary market trading) may expand from around 10% before 2025 to around 30%, significantly improving liquidity. Additionally, the potential investors introduced through the second quarter convertible bonds and Chow Tai Fook Enterprises' share exchange are likely to be mainstream institutional investors from both domestic and overseas markets, which is expected to further improve the company's shareholding structure and secondary market trading activity.

**Company Still Has Upside Potential in Next 3-6 Months** First, based on the announcement (equity change statement as of September 10), the firm has sorted out that the cumulative number of converted shares from the convertible bonds issued in the second quarter has reached approximately 500 million shares, accounting for about 57% of the 865 million shares issued, with most conversions already executed.

Second, Chow Tai Fook Enterprises' share exchange implies HK$2.65 per share, which can be viewed as the cost for new entering investors and will not constitute short-term pressure on the stock price.

Third, the firm expects the company's earnings to continue showing positive momentum alongside the development of the robotics industry.