On Wednesday, Goldman Sachs updated its outlook on Shenzhou International Group Holdings Ltd (2313:HK) (OTC: SHZHY) shares, raising the price target to HK$105.00 from the previous HK$98.00 while maintaining a Buy rating on the stock. The firm's revision reflects a more optimistic view on the company's future orders and potential for margin recovery.
The positive adjustment comes after observing the solid performance of Shenzhou's industry peers, along with encouraging sales and healthier inventory levels among customers of the covered Original Equipment Manufacturers (OEMs). Goldman Sachs now anticipates a 20% year-over-year growth in volume for Shenzhou, an increase from the previously forecasted 13%, propelled by stronger-than-expected demand from key accounts.
However, the firm has adjusted its Average Selling Price (ASP) forecast in US dollars to a decline of 4% year-over-year, a steeper drop than the initial estimate of 1.5%. This revision is attributed to a shift in the product mix, with a higher proportion of casual product sales expected.
On the profitability front, Goldman Sachs projects that Shenzhou's Gross Profit Margin (GPM) will reach 29% in 2024, an improvement from the earlier estimate of 27.5%. This anticipated growth in margins is supported by increased operational efficiency and ongoing improvements in utilization rates. The firm also stated that it is keeping its Operating Expense (OPEX) ratio forecast unchanged.
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