SHENZHOU INTL (02313) has had its target price slashed to HK$70 from HK$81 by JP Morgan, though the investment bank maintains an "overweight" rating on the stock, according to a research report.

The revised target price implies a 12-month forward price-to-earnings ratio of 17 times. JP Morgan has lowered its earnings forecasts for SHENZHOU INTL for the 2027 to 2028 period by 14% to 16%, attributing the adjustment to macroeconomic uncertainties.

JP Morgan anticipates that SHENZHOU INTL's sales in the first half of 2026 will decline by a low-to-mid single-digit percentage year-on-year. This weakness is expected to be driven by orders from Puma and Nike, but partially offset by strong momentum from Adidas and domestic brands like ANTA SPORTS PRODUCTS (02020) and LI-NING (02331). The company is facing multiple headwinds, including tariff sharing, a rise in raw material prices in the second quarter of 2026, and exchange rate fluctuations. As a result, JP Morgan expects the gross margin to contract by 2 to 3 percentage points year-on-year. Combined with a reduction in non-operating income, the bank forecasts first-half 2026 profit to drop by approximately 30% year-on-year.

Looking ahead to the second half of 2026, JP Morgan expects a sequential improvement in orders. The bank believes SHENZHOU INTL will continue to gain market share among its core clients. With the potential for improving client sentiment and a low base of comparison, JP Morgan projects sales and profit growth of 10% and 13%, respectively, in the second half. This anticipated improvement could drive a re-rating of the stock.