China Galaxy Securities has initiated coverage on SHENZHOU INTL (02313) with a "Recommend" rating. As a global leader in apparel manufacturing, the company has established strong comprehensive competitive advantages in research and development, supply chain management, production efficiency, and brand quality, with deep partnerships with leading international brands. The company has accelerated its overseas capacity expansion and increased investment in fabric R&D in recent years. Considering that the company will benefit from overseas capacity expansion and fabric technology upgrades, net profit attributable to shareholders is expected to reach RMB 6.628 billion, RMB 7.413 billion, and RMB 8.141 billion in 2025/26/27 respectively, representing year-on-year growth of 6.2%, 11.85%, and 9.82%.
**Global Apparel Manufacturing Leader with Steady Performance Recovery**
The company is a global leader in vertically integrated knitted manufacturing. In 2024, it achieved operating revenue of RMB 28.663 billion, up 14.8% year-on-year, with net profit attributable to shareholders reaching RMB 6.241 billion, up 36.9% year-on-year. Sportswear is the main OEM product, generating revenue of RMB 19.799 billion in 2024, accounting for 69.1% of total revenue. The company's gross margin was 28.10% in 2024, up 3.83 percentage points year-on-year, while net margin was 21.77%, up 3.52 percentage points year-on-year. The company maintains a reasonable cost structure, with management expense ratio continuously declining since 2021, reaching 6.76% in 2024, down 0.77 percentage points year-on-year. The company's turnover efficiency remains stable, with inventory turnover days of 114 days and accounts receivable turnover days of 70 days in 2024.
**Global Capacity Layout Matching Market Demand**
The company actively promotes global capacity layout to consolidate its industry-leading position. It began internationalization in 2005 by establishing its first factory in Cambodia, followed by continuous construction and commissioning of factories in Vietnam and Cambodia from 2013-2019. The company's overseas capacity continues to expand, driving up the proportion of offshore capacity. In 2023, overseas factories accounted for approximately 53% of the company's total garment output, up 7 percentage points year-on-year. The company's newly built garment factory in Cambodia began production in March 2025 and currently employs approximately 4,000 staff. Meanwhile, the company's new fabric factory project in Tay Ninh Province, Vietnam is progressing smoothly and is expected to gradually commence production by the end of 2025. The Vietnam factory is planned to have a fabric capacity of 200 tons per day, which upon completion will provide fabric supply to the company's Southeast Asian garment factories, enabling faster response to customer demands.
**Vertical Integration Supply Chain Ensures Product Timeliness and Quality**
The company's vertically integrated supply chain model covers the entire industrial chain from raw material procurement to finished product delivery, improving efficiency through integration of various production stages. The vertically integrated supply chain model covers the entire industrial chain from raw material procurement to finished product delivery, achieving efficiency improvements through deep integration of production stages. In the procurement process, the company integrates multiple core departments into supply chain management processes, ensuring efficient operation and stable development of the supply chain through multi-departmental cooperation. Additionally, the company promotes nearshore and localized procurement to improve raw material procurement response speed and ensure rapid order production and delivery.
**Deep Partnerships with Leading Brand Customers Consolidate Customer Base Advantages**
The company's customer base covers sports and casual apparel brands. In 2024, four major customers - NIKE, ADIDAS, UNIQLO, and PUMA - collectively contributed 80.7% of total annual revenue, consolidating the core business foundation. In recent years, the company has continued expanding new customers, establishing new partnerships with lululemon and Lacoste. Meanwhile, the company deepens customer relationships through dedicated factory models and R&D collaboration, providing customers with comprehensive ODM "one-stop" service covering fabric development to garment manufacturing across the entire industrial chain.