Tianfeng: Maintain "buy" rating on STELLA HOLDINGS (01836) as growth is driven by sports and new customer demand.

Tianfeng released a research report stating that it maintains a "buy" rating for STELLA HOLDINGS (01836). Based on the company's performance in the third quarter, considering the relatively weak consumer environment, the profit forecast has been adjusted. The forecasted revenue for 2025-2027 is expected to be 1.58 billion USD, 1.66 billion USD, and 1.76 billion USD respectively (previously 1.62 billion USD, 1.71 billion USD, 1.81 billion USD), with net profit of 160 million USD, 170 million USD, and 190 million USD respectively (previously 160 million USD, 180 million USD, 190 million USD); corresponding PEs are 11, 10, 9 times. As the company's three-year plan (2023-2025) nears completion, the company is expected to achieve a 10% operating profit margin and a low double-digit compound annual growth rate in after-tax profits during the three-year period. The company has already exceeded this goal in 2023 and 2024. Looking ahead, the company will continue to improve its product category mix, diversify and expand its customer base, and optimize its manufacturing base layout. The company will continue to optimize the production capacity allocation between luxury and high-end fashion categories and new sports categories customers. With two new customers in the fashion and sports categories expected to receive shipments in the second half of the year, non-customer-specific manufacturing facilities are expected to operate close to full capacity in the second half of the year. Despite current market uncertainties, the demand for the company's product development and production capacity remains strong as the company continues to win new customers. The company is also committed to developing its handbag and accessories manufacturing business into a core growth driver, aiming to attract more high-end customer groups. Accelerating the development of this business will be one of the key focuses of the next three-year plan (starting in 2026). The company recently completed the acquisition of a small handbag and accessories factory in Vietnam and plans to utilize the factory's expertise and experienced team to enhance the quality and production efficiency of the company's handbag and accessories manufacturing business.