CICC: Lower target price of REGINA MIRACLE (02199) to HK$2.38, maintain "outperform" rating in the industry.

CICC released a research report stating that considering the uncertainty of the US tariff policy and its impact, it has lowered REGINA MIRACLE's (02199) FY26 profit forecast by 27.8% to HK$220 million, and introduced a FY27 profit forecast of HK$360 million. The current stock price corresponds to 12x/7x P/E for FY26/FY27 respectively, maintaining an outperform industry rating. The target price has been lowered by 21% to HK$2.38, corresponding to 13x/8x P/E for FY26/FY27 respectively, with a potential upside of 13.3% from the current stock price. Key points from CICC: FY25 performance met expectations The company reported FY25 results: revenue increased by 11.7% to HK$7.84 billion year-on-year; net profit attributable to equity holders increased by 28.4% to HK$180 million year-on-year. In particular, 2HFY25 revenue increased by 11.2% to HK$3.86 billion year-on-year, and net profit attributable to equity holders increased by 219.6% to HK$120 million year-on-year. FY25 performance met expectations. In addition, the company announced a final dividend distribution of HK$0.043 per share for FY25, representing a dividend payout ratio of 45.3% for the year. Innovative products and multiple-brand customers drove the growth of sports products in FY25 FY25 revenue from the two main businesses of intimate apparel/sports products increased by 3.0%/26.9% to HK$4.24 billion/ HK$2.93 billion respectively, with the growth of sports apparel products benefiting from the development of multiple categories and the expansion of multiple growth brand customers. Sports bras achieved high double-digit growth, with revenue from functional clothing such as Polo, Jacket, and Leggings increasing by nearly 50% year-on-year to over HK$1.1 billion; 2HFY25 revenue from intimate apparel/sports products increased by 4.4%/22.0% to HK$2.00 billion/ HK$1.61 billion respectively. FY25 revenue from consumer electronics accessories increased by 43.2% to HK$410 million year-on-year, mainly due to inventory stocking before the launch of new products; revenue from cup and other accessories decreased by 15.0% to HK$250 million year-on-year, mainly due to the cessation of footwear business. In addition, in a stable consumption environment, FY25 revenue from Victoria's Secret China increased by 4.4% to HK$1.97 billion year-on-year, with double-digit growth in e-commerce revenue and a slight decline in store revenue, and net profit increased by 0.2% to HK$86 million year-on-year. Increase in capacity utilization rate drove the increase in gross profit margin, relocation expenses affecting profits With an increase in capacity utilization, FY25 gross profit margin increased by 0.8ppt to 23.4% year-on-year. In terms of expenses, FY25 sales/management/research and development expenses increased by 0.1ppt/0.1ppt/0.1ppt to 2.2%/8.1%/3.9% respectively, remaining stable; financial expenses decreased by 0.4ppt to 4.4% year-on-year. In addition, the company incurred other operating expenses of HK$220 million due to the relocation of its domestic production base. Overall, the net profit margin for FY25 increased by 0.3ppt to 2.3% year-on-year. Development trends Regarding orders, the bank expects high visibility for 1HFY26 orders, while the impact of the US tariff policy on consumer purchasing power remains uncertain, making it difficult to judge the order situation for 2HFY26; by category, the bank expects the intimate apparel segment to remain stable, sports products to continue growing due to the Bonding apparel trend, and consumer electronics to fluctuate due to inventory stocking. In terms of expenses, the company plans to continue implementing cost reduction and efficiency improvement measures, including reducing capital expenditures and debt, and the labor compensation expected from the relocation of the domestic production base will be completed in FY26. Risk factors: Risks related to tariff policies, weak end demand, and unexpected capacity ramp-up.