Daiwa released a research report stating that STELLA HOLDINGS (01836) reported interim net profit of $78.6 million, compared to market expectations of $75.8 million. Excluding $7 million in one-time expenses related to production expansion issues in Indonesia and the Philippines, net profit should have been $85.6 million, representing a 7% year-on-year decline. The firm has lowered its earnings per share forecasts for the company for this year and next year by 2% to 5%, reflecting the impact of the factory expansion issues and temporary tariff support provided to designated clients. The target price has been raised from HK$17 to HK$20, representing 12 times the average annual earnings per share forecast for this year and next year, while maintaining a "Buy" rating.

The firm noted that 1 million pairs of shoes were shipped early in the first half of last year, creating a high base effect. After further excluding this impact (estimated at $8 million), the company's interim net profit should have actually increased by 2% year-on-year. The firm indicated that based on the company's additional annual profit distribution of $60 million, unless the company uses these funds for share buybacks, the dividend yield for this year and next year is expected to reach 10%, which is very attractive. The firm expects the company to disclose its three-year net profit growth plan when announcing third-quarter results, with a target compound annual growth rate of high single digits for 2026 to 2028.