CICC: First coverage of CRYSTAL INTL (02232) with an Outperform rating and a target price of 7.32 Hong Kong dollars.

Zhongjin released a research report stating that it is expected that CRYSTAL INTL(02232) will have an EPS of $0.09 for the years 2026-27, with a CAGR of 10% for the years 2025-2027. The current stock price corresponds to a P/E of 9x/8x for 2026/27. Based on a P/E of 11x for 2026, a target price of HK$7.32 is given, which represents a 26% upside potential compared to the current price. It is given an outperform rating for the first time. The bank is more optimistic about its fast asset turnover efficiency and cross-category innovation capability. Against the backdrop of rapidly changing fashion trends, the company may show stronger performance resilience than single-category manufacturers; the dividend yield for 2026 is 7.6%, providing a safety margin. Key points from Zhongjin are as follows: Leading in scale and diverse in categories, the garment manufacturing giant has a high asset turnover driving ROE CRYSTAL INTL was founded in 1970 and is currently the second largest revenue scale company in the world, covering five major categories of listed garment manufacturers: casual wear, denim wear, sports and outdoor wear, intimate wear, and knitwear. The company's production cycle is short, with high asset turnover efficiency, leading to an ROE of approximately 14% over the past 25 years. Strong development ability with a collaborative creation model, globalized capacity, and intelligent manufacturing build barriers The company's core competitiveness lies in its unique "collaborative creation model," which can shorten traditional development decision cycles from weeks to days. Under the full category processes, the company excels in cross-category innovation, such as applying knitwear weaving technology to sportswear to promote customer purchases. On the capacity side, the company's production bases are spread across Vietnam, China, Cambodia, Bangladesh, and Sri Lanka, with overseas capacity accounting for over 80%. Moreover, the high level of automation and intelligence has improved production efficiency, driving sustained increases in per capita profits. Customer order growth momentum, represented by UNIQLO, is strong, and the prosperity of fashion leisure wear may see a cyclical resurgence UNIQLO, accounting for 37% of the company's revenue, continues to achieve record performance levels, with the bank predicting that UNIQLO's upward momentum will be the cornerstone of the company's order growth. Additionally, as there is a trend towards products that are both functional and fashionable, the prosperity of leisure wear is expected to rise cyclically. As a core supplier of leisure wear, the company is expected to benefit significantly, and the bank also expects the company to increase its share in brands like adidas in the sportswear category. Potential catalysts: Orders exceeding expectations, efficiency improvements exceeding expectations. Risk factors: Orders and capacity expansion below expectations, fluctuations in tariff policies, risks of rising raw material prices.