Bank of Communications International has issued a research report revising its outlook for SHENZHOU INTL (02313). In light of the company's guidance, the firm has adopted more conservative revenue assumptions, leading to a 6-9% reduction in revenue forecasts for 2026 and 2027. Gross profit margin projections have also been lowered, with the 2026 margin expected to be roughly flat year-on-year. Based on these adjustments, the profit forecasts for 2026 and 2027 have been cut by 15-18%. Maintaining a forecasted 2026 price-to-earnings ratio of 16 times, the target price has been reduced to HK$74.1, which corresponds to a projected P/E ratio of 16 times for the current year. The "Buy" rating is reaffirmed.

The report notes that SHENZHOU INTL's 2025 financial performance fell short of expectations, with pressure on its gross profit margin. The company's revenue for 2025 increased by 8.1% year-on-year to RMB 31 billion, driven by a volume increase of approximately 9%, although average selling price experienced a slight decline. The full-year gross profit margin decreased by 1.8 percentage points year-on-year to 26.3%, indicating margin stress. This decline was primarily attributed to rising labor costs, inefficiencies during the ramp-up phase of a new garment factory in Cambodia, and the company's share of certain US import tariffs for customers in the second half of the year. Consequently, net profit attributable to shareholders decreased by 6.7% year-on-year to RMB 5.83 billion, below the firm's expectations.

Management has guided for mid-single-digit capacity growth in 2026 but indicated that the gross profit margin outlook remains uncertain.