JPMorgan has released a research report indicating that it expects Shenzhou International (02313) to see gradual revenue improvement in the second half of the year, with earnings remaining largely stable before a significant recovery in 2027. However, the pace of gross margin recovery remains a key variable. The bank has lowered its target price on the company from HKD 70 to HKD 60.

At the current share price, the company trades at 9 times the forecast price-to-earnings ratio for 2027. Combined with an interim dividend payout ratio of 61.5%, the bank believes the risk-reward profile is attractive if orders recover as expected and gross margins gradually normalize, thus maintaining its 'Overweight' rating.

The bank anticipates a sequential improvement in order momentum in the second half of the year, supported by continued traction from Adidas and Uniqlo, narrowing declines at Nike and Puma, robust positive growth from domestic Chinese brands such as Anta Sports (02020) and Li Ning (02331), contributions from new clients like ALO, and a favorable low-base effect.

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