Morgan Stanley: Maintains "Underperform" rating for STELLA HOLDINGS (01836), target price raised to HKD 12.

Morgan Stanley released a research report stating that STELLA HOLDINGS (01836) saw a 3% increase in freight volume in the fourth quarter year-on-year, but due to unfavorable product mix and falling raw material prices, the average price dropped by 3.1%. The group's revenue fell by 1.1% year-on-year. The bank raised the group's net profit forecast for the fiscal year 2024 to 2025 by 4.7% and 8%, and raised the target price by 9% from HK$11 to HK$12, maintaining an "underperform" rating. The bank cited NineX management as saying that due to weakening orders from luxury brands and a shift towards lower-priced products, the group is expected to achieve a 5% increase in sales volume this year, while the average price is expected to drop by 1 to 2%. The target operating profit margin is expected to expand year-on-year. However, Morgan Stanley remains cautious about this target because there will be a period of ramp-up after the new production capacity comes online to achieve full utilization, and management expects worker wages to increase by over 5% year-on-year.