HK Stock Market Move | SHENZHOU INTL (02313) falls nearly 3% in the afternoon, Macquarie says wage increases will temporarily impact profits, and product average prices are expected to narrow their decline.

SHENZHOU INTL (02313) fell nearly 3% in the afternoon, falling 2.55% to HK$59.25 by the time of publication, with a turnover of 187 million Hong Kong dollars. Morgan Stanley released a research report stating that SHENZHOU INTL's production measures in the second half of 2024 are expected to improve employee productivity, with sales expected to increase by 17% year-on-year. Due to a higher proportion of sportswear and casual wear, the average selling price is expected to decrease slightly compared to the first half of the year. The bank expects the group's gross margin in the second half of the year to reach 27.2%, an increase of 1.4 percentage points year-on-year. However, due to temporary impact from wage increases on profits, it is expected to decrease by 1.8 percentage points compared to the first half of the year. The bank believes that the company will pass on costs to brand customers at the appropriate time. CICC previously pointed out that SHENZHOU is the main beneficiary of international brand replenishment in the second half of the year, expecting an 8% revenue growth for SHENZHOU in the second half of the year. This is mainly due to the recovery of orders from Puma, as well as double-digit order growth from Adidas, Lululemon, and domestic sports brands. The bank estimates that due to improvements in product mix, SHENZHOU's average selling price will decrease from around 6% in the first half of 2024 to 2-3% in the second half of the year. In addition, the bank also estimates that the gross margin in the second half of the year will expand by 2.9 percentage points year-on-year to 28.7%, which is basically flat compared to the first half of the year.