[ET Net News Agency, 13 November 2019] Daiwa Research lifted its target price for
Shenzhou International (02313) to HK$132 from HK$122 and maintained its "buy" rating.
The research house said Shenzhou outperformed the Hang Seng Index by 16pp year-to-date,
but Daiwa believes the stock is likely to maintain the positive momentum into 2020 on a
combination of strong 2019 results, a positive 2020 outlook, continued strength of its
four major customers and solid execution in its overseas expansion.
Compared with 1H, Daiwa believes the improvement in operating margin is likely in 2H,
due to (1) a high one-off freight expense in 2H 2018 versus a likely much smaller amount
in 2H 2019, and (2) a likely slowdown in the pace of the wage hike in 2H 2019.
Daiwa trimmed its 2020-21 operating margin by 0.2-0.3pp after factoring in a
longer-than-expected period for retail store closure and incremental expenses related to
factory ramp-ups. (KL)