NextFin News - Shenzhou International Group Holdings, the world’s largest vertically integrated knitwear manufacturer, saw its shares come under renewed pressure after reporting a 6.7% decline in annual net profit for 2025. The results, which fell short of market expectations despite a modest rise in revenue, prompted BOCOM International to slash its target price for the stock to HKD 74.1 from its previous estimate. The downward revision reflects growing concerns over the company’s ability to protect margins in an environment characterized by volatile foreign exchange movements and rising operational costs.
The financial statement released on March 30, 2026, revealed that while revenue grew 8.1% to RMB 30.99 billion, net profit attributable to owners of the parent slipped to RMB 5.83 billion. The disconnect between top-line growth and bottom-line performance was largely driven by a significant swing in "other gains and losses." In 2024, the company benefited from a net gain of RMB 458.8 million; however, in 2025, this turned into a net loss of RMB 254.3 million, primarily due to exchange rate fluctuations affecting the company’s extensive export operations. Gross profit remained relatively flat at RMB 8.17 billion, as the cost of sales rose by 10.8%, outpacing revenue growth.
BOCOM International, which has historically maintained a constructive but cautious stance on the textile giant, noted that the 2025 performance missed its internal forecasts. The brokerage’s decision to lower the target price to HKD 74.1 is rooted in a more conservative outlook for the company’s margin recovery. BOCOM analysts have frequently highlighted Shenzhou’s industry-leading efficiency, yet they now suggest that the "low-hanging fruit" of post-pandemic capacity optimization has been largely picked. This perspective, while influential, remains a specific institutional view and does not yet represent a broader consensus among the dozens of investment banks covering the stock.
The challenges facing Shenzhou are not limited to currency headwinds. Administrative expenses rose 8.1% to RMB 2.1 billion, tracking the revenue growth exactly and suggesting limited operating leverage during the period. Furthermore, the company’s total comprehensive income for the year dropped 13.9% to RMB 5.31 billion, weighed down by a RMB 512.6 million loss in exchange differences on translation of foreign operations. This highlights the inherent risks in Shenzhou’s global footprint, where production in Southeast Asia and sales to major brands like Nike and Adidas create complex currency exposures that are becoming increasingly difficult to hedge effectively.
A more optimistic counter-narrative exists among some analysts who point to the 8.1% revenue growth as a sign of resilient demand from global sportswear brands. These observers argue that the core manufacturing business remains robust and that the profit dip is largely "noisy" due to non-cash accounting items and transient FX volatility. They suggest that if the Renminbi stabilizes and the company continues to gain market share from smaller, less efficient competitors, the current valuation could represent an attractive entry point for long-term investors.
The company’s balance sheet remains a pillar of strength, with cash and cash equivalents surging to RMB 15.41 billion by the end of 2025, up from RMB 10.87 billion a year earlier. This liquidity provides a significant buffer, yet it also raises questions about capital allocation. With a final dividend of HKD 1.10 per share announced, the total payout for the year remains a focal point for income-seeking investors who are weighing the yield against the backdrop of stagnant earnings growth. The path forward for Shenzhou will likely depend on its ability to pass through rising costs to its powerful global clients, a feat that is becoming harder as the global retail environment remains fragmented.
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