Huachuang Securities: Initiates (00625) with "Recommended" Rating, Target Price HK$49.14

Huachuang Securities released a research report initiating coverage of (00625) with a "Recommended" rating and a target price of HK$49.14. The firm estimates that the company will achieve operating revenue of US$42.8/45.2/47.6 billion in 2026-2028, representing year-on-year growth of +2.3%/+5.5%/+5.4%; and net profit attributable to shareholders of US$1.40/2.05/2.34 billion, representing year-on-year changes of -32.3%/+46.5%/+14.4%. With reference to comparable company valuations and taking into account SHEIN's greater platformization growth potential, the firm assigns a 13x PE based on 2027 forecast earnings. The firm believes that short-term trade policy disruptions will weigh on performance, but in the long term, it is bullish on supply chain and traffic barriers supporting platformization-driven growth. The main views of Huachuang Securities are as follows: Global e-commerce continues steady expansion, while Chinese cross-border e-commerce reshapes the competitive landscape Global retail e-commerce sales reached approximately US$6.86 trillion in 2025 and are expected to grow to US$9.71 trillion by 2030, with e-commerce penetration continuing to rise. Chinese e-commerce platforms are accelerating globalization, with SHEIN and Temu rising rapidly, driving a restructuring of the global cross-border e-commerce competitive landscape. At the same time, the global cross-border e-commerce policy environment has undergone notable changes, with markets such as the United States and the European Union successively tightening low-value parcel tariff policies. The low-cost dividend of traditional cross-border direct mail is gradually fading, and tariff, overseas warehouse stocking, and compliance costs have risen significantly. Industry competition is shifting from reliance solely on China's supply chain cost advantages to comprehensive competition in supply chain efficiency, global fulfillment, localized operations, and brand traffic. SHEIN has grown from a cross-border fast fashion brand into the world's largest online fashion destination Relying on China's supply chain advantages and internet-based operational capabilities, the company has expanded rapidly worldwide. In 2025, it served approximately 160 markets, had 273 million active customers, and achieved net revenue of US$41.85 billion, making it the world's largest online fashion destination. As its scale expands, the company's operating boundaries continue to broaden: first-party proprietary operations undertake product differentiation and consumer mindshare building, the third-party marketplace opens global traffic and fulfillment capabilities to external merchants, and Xcelerator further exports supply chain capabilities to brands and designers. SHEIN is extending from a cross-border DTC retailer toward a global fashion infrastructure of "proprietary brand + e-commerce platform + supply chain services." Small-batch rapid-replenishment supply chain and globalized traffic operations build SHEIN's dual core barriers On the supply chain side, the company uses LATR (large-scale automated small-batch rapid response) to connect demand insights, product development, and flexible manufacturing through "small-batch testing + dynamic replenishment," maintaining high inventory efficiency while launching massive numbers of new products. Approximately 7,500 contract manufacturers and more than 1,700 self-developed software systems further digitize, standardize, and schedule dispersed production capacity, with enormous order scale and a flexible supply chain forming continuously strengthening economies of scale. On the traffic side, from Google search, influencer marketing, Pinterest, and Facebook/Instagram to TikTok, SHEIN continuously captures the migration of overseas traffic channels and further retains users through affiliate marketing, a massive number of mid- and long-tail influencers, and an APP points system. Long-term accumulated traffic operations have been transformed into global brand awareness and a consumer base in the hundreds of millions, which together with supply chain capabilities constitute the company's difficult-to-replicate competitive barriers. Platformization and servitization open a second growth curve SHEIN launched its third-party marketplace in the second half of 2022 and gradually formed three models: agency operations, semi-managed operations, and self-operated operations, opening its existing traffic, transaction, marketing, and fulfillment capabilities to third-party merchants. Third-party supply also helps the company accelerate expansion into categories with weaker coverage in its original supply chain, such as home goods, beauty and personal care, and 3C. In 2025, the company further upgraded SHEIN X to Xcelerator, exporting design conversion, small-batch rapid replenishment, supply chain management, and global sales capabilities to external brands and designers. The firm believes that SHEIN has gradually extended from a cross-border retailer focused mainly on proprietary fast fashion toward a "proprietary + platform" model. Short-term trade policy disruptions will weigh on performance, but in the long term, it is bullish on supply chain and traffic barriers supporting platformization-driven growth. Risk warnings: overseas trade policy and regulatory risks; platformization progress falling short of expectations; rising traffic costs; intensifying industry competition.