Revenue contribution from Lululemon's orders to Shenzhou International likely to double in 2023

Recently, Shenzhou International announced its performance for the first half of the year. As the largest sportswear OEM factory in China, its revenue for the first half of the year decreased by 15% year-on-year to 11.5 billion yuan, with a gross profit margin of about 22.4%. Net profit declined by 10% year-on-year to 2.127 billion yuan, mainly affected by exchange rate fluctuations and weak global demand.

During the reporting period, the group's revenue from sportswear decreased by nearly 20% year-on-year to 8.56 billion yuan. Revenue from Nike, Adidas, and Puma fell by 22%, 26%, and 29% respectively to 3.466 billion yuan, 1.885 billion yuan, and 1.336 billion yuan.

Revenue from leisurewear increased by 10% to 2.299 billion yuan. Revenue from Uniqlo grew by 5% year-on-year to 2.54 billion yuan, becoming the second largest brand contributing to the performance after Nike. Revenue from underwear remained relatively stable, with a 0.4% year-on-year increase to 613 million yuan.

In terms of regions, Shenzhou International's revenue from the European market dropped by 27.2% to 2.42 billion yuan, while the US market saw a significant decline of 32.7% to 1.83 billion yuan. Domestic business also declined by 3.6% to 3.1 billion yuan. In Japan, revenue increased by 2% to 1.67 billion yuan driven by Uniqlo.

It is worth noting that the number of orders from new client Lululemon doubled during the period, and the revenue contribution from Chinese domestic brands such as Anta and Li Ning also increased to 10.8%, offsetting part of the decline. Data shows that the collaboration between Lululemon and Shenzhou International began in 2022, and the revenue contribution from this brand's orders is expected to double this year.

For the full year 2023 performance, Shenzhou International expects revenue to decrease by 1.6% to 27.34 billion yuan, and net profit to increase by 0.7% to 4.6 billion yuan. After a brief adjustment, group revenue is projected to increase by 12.8% and 11.9% to 30.83 billion yuan and 34.5 billion yuan in 2024 and 2025 respectively. Net profit is expected to increase by 17% and 14.6% to 5.37 billion yuan and 6.16 billion yuan.