Bank of America Securities: Maintaining Shenzhou International's (02313) “Buy” Rating and Lowering Target Price to HK$50

The Zhitong Finance App learned that Bank of America Securities released a research report stating that it lowered Shenzhou International's (02313) 2026 and 2027 earnings forecasts by 12% and 8% respectively to reflect higher foreign exchange losses and lower gross profit margins, and lowered the target price from HK$53.2 to HK$50. The rating remains “buy”. Currently, it is predicted that net profit for the second half of the year could increase 4% year-on-year to RMB 2.76 billion.

Shenzhou expects net profit to fall 38% to 43% year-on-year in the first half of this year, mainly hampered by the appreciation of RMB, rising raw materials and labor and pension costs, and a slight drop in sales. Shenzhou International's mid-term profit performance fell short of the 30% to 35% decline predicted by the market, which is believed to be mainly affected by foreign exchange factors.

Based on the latest data, the bank currently predicts that Shenzhou International's mid-term revenue will fall by 5%, gross margin is expected to narrow by more than 3 percentage points to 24% year on year. The estimated foreign exchange loss for the period will reach about 600 million yuan. It predicts that government subsidies will be reduced by about 100 million yuan due to the decline in earnings per share in 2025. The comprehensive forecast is that net profit will drop 40% in the first half of the year. Excluding foreign exchange losses and government subsidies, Bank of America Securities estimates that Shenzhou International's mid-term adjusted profit before tax fell 19%.