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Shenzhou International Group Holdings Ltd 02313

Morningstar Rating
HKD 74.10 +1.40 (1.93%)
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Company Report

Shenzhou Earnings: Raising Fair Value by 8% on Rapid Profitability Recovery

Shenzhou International's revenue for the second half of 2023 fell slightly behind our expectations, but operating profit was broadly in line. Even with a revenue downturn, the company still managed to improve profitability, suggesting effective cost-control measures and operational resilience that could bode well for future financial performance. There is no exact guidance for 2024, but management conveyed a positive outlook, saying "We are very optimistic for 2024." This optimism leads us to anticipate that revenue growth could very well hit the midteens percentages in 2024, and profitability recovery could come faster than we previously expected. As a result, we raise our fair value estimate by 8% to HKD 124, and view shares as materially undervalued.

Price vs Fair Value

02313 is trading at a 44% discount.
Price
HKD 64.85
Fair Value
HKD 151.00
Uncertainty
High
1-Star Price
HKD 545.99
5-Star Price
HKD 97.00
Economic Moat
Kmhfnk
Capital Allocation
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Bulls Say, Bears Say

Bulls

Large-scale apparel manufacturers compete on the basis of specialization and the provision of additional apparel-related services; with integrated Shenzhou atop of its peers in these areas.

Bears

Athleisure has come a long way, and signs of saturation are emerging. A slowdown in sportswear sales worldwide will damage Shenzhou’s top line.

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Trading Information

Previous Close Price
HKD 72.70
Day Range
HKD 72.9575.00
52-Week Range
HKD 60.8087.25
Bid/Ask
HKD 74.05 / HKD 74.10
Market Cap
HKD 111.39 Bil
Volume/Avg
8.3 Mil / 4.0 Mil

Key Statistics

Price/Earnings (Normalized)
22.52
Price/Sales
3.95
Dividend Yield (Trailing)
2.48%
Dividend Yield (Forward)
2.97%
Total Yield
2.48%

Company Profile

Shenzhou is the largest vertically integrated knitwear manufacturer in the world. The group mainly produces sportswear (75% of 2022 revenue), casual wear (21% of revenue), and lingerie (3% of revenue) for international clients such as Nike, Adidas, Puma, and Uniqlo. Mainland China is its largest market, accounting for 26% of sales in 2022. This is followed by Europe, the US and Japan. Shenzhou currently operates manufacturing plants in China, Cambodia, and Vietnam.
Sector
Consumer Cyclical
Industry
Textile Manufacturing
Stock Style Box
Large Core
Total Number of Employees
92,030

Competitors

Valuation

Metric
02313
NKE
ADDYY
Price/Earnings (Normalized)
22.5227.5238.29
Price/Book Value
10.037.84
Price/Sales
3.952.811.71
Price/Cash Flow
18.4622.0935.18
Price/Earnings
02313
NKE
ADDYY

Financial Strength

Metric
02313
NKE
ADDYY
Quick Ratio
1.601.630.53
Current Ratio
2.162.741.22
Interest Coverage
17.081.16
Quick Ratio
02313
NKE
ADDYY

Profitability

Metric
02313
NKE
ADDYY
Return on Assets (Normalized)
9.71%15.46%0.75%
Return on Equity (Normalized)
13.97%40.71%2.96%
Return on Invested Capital (Normalized)
10.05%21.65%2.15%
Return on Assets
02313
NKE
ADDYY
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Textile Manufacturing Industry Comparables

Ticker
Name
Morningstar Rating for Stocks
Capital Allocation
Economic Moat
Market Cap
SZHIF
Shenzhou International Group Holdings LtdZzvzzj$14.0 Bil
TRYIY
Toray Industries Inc ADRHvbcj$7.8 Bil
TRYIF
Toray Industries IncGdhq$7.8 Bil
AIN
Albany International CorpGplcnyq$3.0 Bil
CGGGF
Coats Group PLCJcj$1.6 Bil
LNZNF
Lenzing AGZxqr$1.4 Bil
ECNLF
Aquafil SpAHfcsy$166.3 Mil
UFI
Unifi IncXqbq$105.7 Mil
CULP
Culp IncJgwl$60.2 Mil
DXYN
The Dixie Group IncQxhl$9.2 Mil

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