BOC International: Lowering the target price of Baosheng International (03813) to HK$0.37 to reaffirm the “neutral” rating

The Zhitong Finance App learned that BOC International released a research report stating that it reaffirmed the “neutral” rating of Baosheng International (03813) and lowered the target price to HK$0.37. According to BOC International, Baosheng International's revenue for the first half of the year fell 2.1% year on year to 8.96 billion yuan (same below), but driven by storage optimization and discount control (offline direct discount annual improvement of lower number of units per year), gross margin increased 0.4 percentage points year-on-year to 33.9%; at the same time, the company continued to promote organizational restructuring and cost reduction and efficiency, which led to a year-on-year increase of 0.8 percentage points to 3.9% year-on-year, and net profit increased by 29.0% year-on-year to 240 million yuan.

According to the bank, brand channel adjustments have increased the uncertainty of mid-term operations. According to Baosheng's announcement, Nike will take back the right to operate online from January 1, 2027, and related businesses account for about 15% of the company's revenue. It is worth noting that Nike's online business previously had lower profit margins and lower profit contributions than revenue, so the bank expects channel adjustments to have less impact on the profit side than on the revenue side. Management said that sales trends have remained lackluster since the third quarter, and considering that the brand may adjust orders in the second half of the year and adjust inventory in collaboration with the company, the bank expects the company's sales to remain under pressure in the second half of 2026.

Considering that the recovery in terminal consumption is weaker than previously anticipated and that brand channel adjustments may have a certain impact on the company's future sales scale, the bank lowered Baosheng's 2026-2028 revenue forecast by 4% to 17%, and lowered its profit forecast by 14% to 26% accordingly. The bank added that the company is continuously improving operating efficiency through inventory management, discount control, rent control and labor efficiency; at the same time, the company maintains a strong balance sheet and attracts dividend rates.