Investment Rating - The report gives a "Buy" rating for Shenzhou International, with a target price of approximately 69.4 HKD, indicating a potential upside of 10.6% from the closing price on March 7, 2024 [5][13]. Core Views - Shenzhou International is the largest vertically integrated knitted garment manufacturer in China, primarily serving well-known global sportswear brands such as Nike and Adidas. The company combines fabric manufacturing (OEM) and garment design (ODM) to enhance its competitive edge [2][6]. - The company has three core competitive advantages: a vertically integrated production model, stable capacity release, and a strong focus on ESG and labor relations [3][10][11]. Summary by Sections Company Overview - Shenzhou International is the largest vertically integrated knitted garment manufacturer in China, providing products mainly in sportswear, casual wear, and underwear. The company has a significant market presence in China, Europe, Japan, and the United States [2][6]. - The company has shown stable revenue and profit growth, with revenue increasing from 2.483 billion CNY in 2005 to 27.781 billion CNY in 2022, representing a CAGR of approximately 15.3% [6]. Competitive Advantages - Advantage 1: Vertically Integrated Production Model The company extends its supply chain to fabric production, leading to higher gross and net profit margins compared to pure garment manufacturing. The self-sufficiency in fabric production enhances profitability [3][8]. - Advantage 2: Stable Capacity Release Shenzhou has established production bases in Vietnam and Cambodia, benefiting from lower labor and land costs, which supports business growth [10]. - Advantage 3: Focus on ESG and Labor Relations The company prioritizes environmental protection and energy efficiency, setting ambitious sustainability goals for 2025-2030. It also maintains strong labor relations, resulting in improved employee retention and productivity [11][12]. Financial Projections - Revenue projections for 2023-2025 are 27.28 billion CNY, 30.57 billion CNY, and 34.98 billion CNY, with year-on-year growth rates of -1.8%, +12.1%, and +14.4% respectively. Net profit projections are 4.58 billion CNY, 5.51 billion CNY, and 6.23 billion CNY, with growth rates of +0.3%, +20.4%, and +13.2% respectively [5][13].
垂直一体化制造优势显现