JPMorgan released a research report indicating that it expects SHENZHOU INTL (02313) to see a gradual improvement in revenue during the second half of the year, with earnings largely stabilizing before a significant recovery in 2027. However, the pace of gross margin recovery remains a key variable. The bank has lowered its target price for the company from HK$70 to HK$60.

At its current share price, the company trades at 9 times its forecast price-to-earnings ratio for 2027. Coupled with an interim dividend payout ratio of 61.5%, the risk-reward profile is considered attractive if orders recover as anticipated and gross margins gradually normalize. JPMorgan maintains an "Overweight" rating.

The bank expects the company's order momentum to improve sequentially in the second half, supported by sustained strength from Adidas and Uniqlo, narrowing declines from Nike and Puma, robust positive growth from domestic brands such as ANTA Sports (02020) and Li Ning (02331), contributions from newer clients like ALO, and a favorable low base effect.

JPMorgan projects the company's second-half revenue to grow 2% year-on-year, contrasting with a 5% decline in the first half. Nevertheless, due to sustained gross margin pressure, earnings are expected to decline 4% year-on-year. The bank also forecasts sales and earnings growth of 5% and 14%, respectively, for 2027.