Core Viewpoint - Bank of America Securities has downgraded the earnings forecast for Shenzhou International (02313.HK) by 2% and 3% for the next two years due to unsatisfactory gross margin performance in the first half of the year, while also lowering the target price from HKD 73 to HKD 71.8. However, the bank noted that Shenzhou's main clients experienced significant sales growth, outperforming global peers, and believes the company will enhance market share through its excellent supply chain [1][2]. Group 1 - Shenzhou International's stock closed at HKD 58.0, down 2.27%, with a trading volume of 10.45 million shares and a turnover of HKD 608 million as of August 28, 2025 [1]. - The stock is primarily rated as "Buy" by investment banks, with four banks issuing buy ratings in the last 90 days, and the average target price in this period is HKD 73.72 [1]. - Guosheng Securities has also issued a "Buy" rating for Shenzhou International in its latest report [1]. Group 2 - Shenzhou International has a market capitalization of HKD 89.216 billion, ranking second in the apparel and home textile industry [2]. - Key performance indicators for Shenzhou International compared to the industry average are as follows: - ROE: 18.05% vs. -4.82% (Industry Average) - Market Capitalization: HKD 89.216 billion vs. HKD 8.843 billion (Industry Average) - Revenue: HKD 30.653 billion vs. HKD 3.919 billion (Industry Average) - Net Profit Margin: 21.23% vs. -13.02% (Industry Average) - Gross Margin: 27.11% vs. 37.1% (Industry Average) - Debt Ratio: 34.21% vs. 50.91% (Industry Average) [2].

Group 1 - The apparel and home textile sector experienced a decline of 0.56% on August 28, with Zhenai Meijia leading the drop [1] - The Shanghai Composite Index closed at 3843.6, up 1.14%, while the Shenzhen Component Index closed at 12571.37, up 2.25% [1] - Key stocks in the apparel and home textile sector showed varied performance, with Taikesh's closing price at 23.41, up 4.51%, and Zhenai Meijia at 25.01, down 7.68% [1][2] Group 2 - The sector saw a net outflow of 370 million yuan from institutional investors, while retail investors contributed a net inflow of 245 million yuan [2] - The top stocks by net inflow from retail investors included Meibang Apparel with 12.13 million yuan and Hason Group with 7.34 million yuan [3] - The overall trading volume for the apparel and home textile sector was significant, with stocks like Tanluo Zhe reaching a trading volume of 569,600 shares and a transaction amount of 530 million yuan [1][2]

Investment Rating - The investment rating for the company is "Buy" [5] Core Views - The company demonstrated strong growth in operating net profit, with a 23% increase in H1 2025, despite a decline in net profit due to one-time investment income from the fair value reassessment of Shanghai Jiale [1][4] - The company's revenue reached 2.427 billion yuan in H1 2025, a year-on-year increase of 32.5%, while the net profit attributable to the parent company was 187 million yuan, down 24.8% year-on-year [1] - The company is expected to achieve double-digit growth in OEM revenue, driven by its production capacity advantages in Indonesia and an expanding client base [4] Summary by Sections OEM Manufacturing - In H1 2025, OEM manufacturing revenue was 2.098 billion yuan, up 37.2% year-on-year, with bag manufacturing revenue at 1.419 billion yuan (up 13.0%) and apparel manufacturing revenue at 679 million yuan (up 148.3%) [2] - The gross margin for OEM manufacturing was 24.67%, an increase of 0.96 percentage points year-on-year, with apparel gross margin significantly improving due to enhanced management and integration [2] Brand Operations - Brand operations revenue was 306 million yuan in H1 2025, an increase of 8.9% year-on-year, with distribution revenue at 251 million yuan (up 28.3%) and online revenue at 55 million yuan (down 35.4%) [3] - The gross margin for brand operations was 24.14%, a decrease of 1.10 percentage points year-on-year, but is expected to recover as new products are launched and channels are optimized [3] Financial Forecast and Investment Recommendations - The company is projected to achieve revenues of 5.164 billion yuan, 5.916 billion yuan, and 6.776 billion yuan for 2025, 2026, and 2027 respectively, with year-on-year growth rates of 21.8%, 14.6%, and 14.5% [4] - The net profit attributable to the parent company is expected to be 372.4 million yuan, 459.2 million yuan, and 558.8 million yuan for the same years, with growth rates of -2.3%, 23.3%, and 21.7% respectively [4]

Investment Rating - The investment rating for the company is "Outperform the Market" [5][40]. Core Views - The company is expected to achieve double-digit growth in both revenue and core profit in the first half of 2025, driven by its brand matrix [1][7]. - The management remains confident in the company's development and has updated the guidance for 2025, indicating continued growth potential [3][37]. - The acquisition of JACK WOLFSKIN is expected to enhance the outdoor brand matrix and contribute positively to future growth [30]. Revenue and Profitability - In the first half of 2025, the company's revenue increased by 14.3% year-on-year to 38.54 billion RMB, while the net profit attributable to shareholders rose by 14.5% to 7.03 billion RMB [1][7]. - The revenue breakdown by brand shows Anta at 16.95 billion RMB (up 5.4%), FILA at 14.18 billion RMB (up 8.6%), and other brands at 7.41 billion RMB (up 61.1%) [2][7]. - The overall gross margin decreased by 0.7 percentage points to 63.4%, while the operating profit margin improved by 0.6 percentage points to 26.3% due to effective cost control [1][8]. Brand Performance - Anta brand's revenue growth is attributed to refined operations and a push for globalization, with a gross margin of 54.9% [25]. - FILA brand focuses on high-end sports fashion and professional breakthroughs, achieving a revenue of 14.18 billion RMB with a gross margin of 68.0% [29]. - Other brands, including DESCENTE and KOLON SPORT, saw significant growth, with a revenue increase of 61.1% and a gross margin of 73.9% [30]. Financial Forecasts - The company forecasts net profits of 13.48 billion RMB, 15.46 billion RMB, and 17.36 billion RMB for 2025, 2026, and 2027 respectively, with corresponding growth rates of 13.0%, 14.6%, and 12.3% [3][40]. - The reasonable valuation has been adjusted to 119-124 HKD, corresponding to a PE ratio of 23-24x for 2025 [3][40]. Cash Flow and Financial Health - The net cash position is reported at 31.54 billion RMB, indicating a strong financial condition [1][22]. - The company declared an interim dividend of 1.37 HKD per share, with a payout ratio of 50.2% [1][22].

Investment Rating - The report maintains a "Buy" rating for the company, with a target PE of 14 times for 2025 [7]. Core Views - The company reported a revenue increase of 2% year-on-year for H1 2025, reaching 11.57 billion yuan, while the net profit attributable to shareholders decreased by 3% to 1.58 billion yuan. The non-recurring net profit increased by 4% to 1.57 billion yuan [1]. - The gross margin improved by 1.1 percentage points to 46.4% in H1 2025, indicating enhanced profitability quality [1]. - The company is expected to see steady recovery in profitability quality in H2 2025, driven by new store openings and improved project profitability [5]. Revenue and Profitability - For Q2 2025, the company achieved a revenue of 5.38 billion yuan, a 4% increase year-on-year, while the net profit attributable to shareholders fell by 14% to 650 million yuan [2]. - The gross margin for Q2 2025 increased by 2.6 percentage points to 46% [2]. - The main brand's revenue for H1 2025 decreased by 6% to 8.39 billion yuan, but the gross margin improved by 2.2 percentage points to 48.3% [3]. Brand and Channel Performance - The main brand's performance in Q2 2025 improved compared to Q1, with a significant focus on technology, fashion IP, and quality products [3]. - The group purchase and customization series saw a revenue increase of 24% to 1.34 billion yuan in H1 2025 [3]. - Direct sales channels outperformed franchise channels, with direct sales revenue increasing by 17% to 2.9 billion yuan in H1 2025 [4]. Cash Flow and Inventory Management - The company's inventory at the end of H1 2025 increased by 7.3% to 10.26 billion yuan, with inventory turnover days rising by 49.7 days to 322.6 days [5]. - The net operating cash flow for H1 2025 was 2.72 billion yuan, approximately 1.7 times the net profit attributable to shareholders [5]. Financial Projections - The company expects revenue growth in the low single digits for 2025, with a significant increase in net profit attributable to shareholders [5]. - Projected net profits for 2025, 2026, and 2027 are 2.45 billion yuan, 2.84 billion yuan, and 3.23 billion yuan, respectively [6].

Group 1 - The company has adjusted the exercise price of the 2024 second phase stock option incentive plan to 4.39 yuan per share from the previous 4.49 yuan per share, after accounting for a value adjustment of 0.10 yuan per share [3] - The adjustment of the exercise price is in accordance with the relevant regulations of the incentive plan and has been authorized by the company's third extraordinary general meeting of shareholders [3] - The supervisory board has agreed to the adjustment, stating that it will not affect the continued implementation of the incentive plan and does not harm the interests of the company and its shareholders [3] Group 2 - The company will distribute a cash dividend of 1.00 yuan (including tax) for every 10 shares to all shareholders, with the record date set for July 1, 2025, and the ex-dividend date on July 2, 2025 [2] - The annual shareholders' meeting will be held on May 20, 2025, to review the profit distribution proposal for the year 2024 [2]

Core Points - The company has conducted a review regarding the failure to meet the exercise conditions for the first exercise period of the 2024 stock option incentive plan, resulting in the cancellation of certain stock options [2][3] - The performance targets for the controlling subsidiary, Shanghai Lishang Information Technology Co., Ltd., were not achieved, leading to the inability to exercise stock options for that period [2] - A total of 3.755 million stock options that were granted but not exercised will be canceled, which complies with relevant regulations and will not affect the company's stock distribution or the continuation of the incentive plan [3] Summary by Sections - **Incentive Plan Review**: The supervisory board has reviewed the stock option incentive plan and confirmed that the exercise conditions were not met for the first exercise period [2] - **Performance Targets**: The failure to meet the performance targets of the controlling subsidiary has resulted in the cancellation of stock options for the incentive plan [2] - **Cancellation of Stock Options**: The cancellation of 3.755 million unexercised stock options is in accordance with the regulations and will not harm the interests of the company or its shareholders [3]

Group 1 - The company has reviewed the conditions for the first exercise period of the 2024 second phase stock option incentive plan, noting that the performance targets were not met, leading to the cancellation of stock options [2][3] - A total of 5.2 million stock options that were granted but not exercised will be canceled, in accordance with relevant regulations and the incentive plan [3] - The cancellation of these stock options will not affect the company's compliance with listing requirements or the continuation of the incentive plan, and it does not harm the interests of the company and its shareholders [3]

General Principles - The company aims to establish a scientific and effective incentive and restraint mechanism for the remuneration and resignation management of directors and senior management to ensure stable operations and protect shareholder rights [1] - The applicable personnel include directors, the president, vice presidents, board secretary, and financial director, with similar remuneration and resignation matters for the directors and senior management of controlling subsidiaries [1] Compensation Management Principles of Compensation Management - The compensation system follows principles of fairness, alignment of responsibilities and rights, combination of short-term and long-term incentives, and a balance of incentives and constraints [2] - Directors who also serve as senior management will have their compensation determined based on their specific roles without additional director allowances [2] Management Structure for Compensation - The board of directors has a nomination and compensation assessment committee responsible for setting compensation standards and reviewing the performance of directors and senior management [2] - The human resources and finance departments assist the committee in formulating and implementing compensation plans [2] Composition of Compensation - Independent directors receive a fixed allowance annually, while non-independent directors' compensation is determined based on their specific roles and contributions [3] - Senior management's compensation consists of a base salary and performance bonuses, with the latter linked to annual performance results [3] Payment of Compensation - Independent directors' allowances are paid annually, while non-independent directors and senior management receive monthly base salaries and performance bonuses based on annual assessments [4][6] Adjustment of Compensation - The compensation system should adapt to the company's operational strategy and conditions, with adjustments based on industry salary increases, inflation, company profitability, and strategic changes [7] - The compensation committee can propose revisions to the compensation system based on significant changes in the aforementioned factors [7] Resignation Management Resignation Procedures - Directors and senior management can resign before their term ends by submitting a written resignation report, which takes effect upon receipt by the company [8] - The company must complete the election of new directors within 60 days of a resignation [9] Rights and Obligations After Resignation - Resigning directors and senior management must ensure proper handover of responsibilities and continue to fulfill any public commitments made during their tenure [10][11] - They are also required to maintain confidentiality regarding the company's trade secrets even after leaving [11] Compliance and Cooperation - Resigned personnel must cooperate with the company in follow-up investigations of significant matters during their tenure and fulfill any outstanding obligations [11][12]

Core Viewpoint - The company has established a public opinion management system to enhance its ability to respond to various public opinions, ensuring timely and effective handling of issues that may impact its stock price and reputation [1][2]. Group 1: General Principles - The public opinion management system aims to improve the company's response capabilities and protect investors' rights [1]. - Public opinion includes negative media reports, rumors, and information that may affect investor sentiment and stock price [1]. - The overall principle of public opinion response is to scientifically address issues, highlight guidance, and focus on effectiveness [1]. Group 2: Organizational Structure and Responsibilities - The company has formed a public opinion handling leadership group, led by the chairman, to oversee the management of public opinion [2]. - The leadership group is responsible for decision-making regarding the initiation and termination of public opinion handling efforts [2]. - The board office is tasked with collecting and analyzing public opinion information, monitoring stock price fluctuations, and reporting to the board secretary [2]. Group 3: Handling Principles and Measures - Public opinion information is categorized into major and general public opinions, with major public opinions having a broader impact on the company's image and operations [3]. - The company must maintain sensitivity to public opinion, respond quickly, and coordinate external communication during crises [3][4]. - The reporting process for public opinion information involves immediate notification to the board secretary and appropriate escalation based on the severity of the situation [4][5]. Group 4: Accountability and Legal Considerations - Internal departments and personnel have confidentiality obligations regarding public opinion information, with violations potentially leading to disciplinary actions [5][6]. - The company reserves the right to pursue legal action against media entities that disseminate false or misleading information that harms its reputation [6]. Group 5: Implementation and Amendments - The public opinion management system will be executed in accordance with national laws and regulations, with the board responsible for any necessary amendments [7].