Morgan Stanley has released a research report forecasting that Shenzhou International (02313.HK) will see its net profit decline by 38% to 43% year-on-year in the first half of this year.

This projected drop is attributed to rising raw material and labor costs, with some production capacity still in a ramp-up phase. Additionally, higher oil prices have impacted raw material costs, while weak demand has led to declines in both shipment volumes and revenue for the half-year period.

However, given that investors likely have fully priced in the weak first-half performance, Morgan Stanley believes any share price pullback will present a good buying opportunity. The firm maintains its "Overweight" rating on the stock with a target price of HK$50.

The bank forecasts the median decline in Shenzhou International's net profit to be around 40% to 41%, which is below its earlier estimate of a 27% drop and the market consensus of an 18% decline. Morgan Stanley expects short-term volatility in the stock price until the company officially announces its first-half results.