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Investing.com - HSBC downgraded Shanghai M&G Stationery (SHA:603899) from Hold to Reduce and lowered its price target to RMB23.50 from RMB25.70, citing concerns about sluggish student stationery demand and increased market competition.
The bank reduced its 2025-2027 revenue forecasts by 8.8%, 12.6%, and 14.9% respectively, reflecting expectations of market cannibalization by new entrants. Despite raising gross margin estimates slightly due to traditional business product mix optimization, HSBC lowered earnings per share projections by 20.4%, 22.6%, and 19.9% for the same period.
Shanghai M&G shares have gained only 3% since April, significantly underperforming the CSI 300 index which rose 16% during the same timeframe. The underperformance stems from investor concerns about an industry downcycle and intensifying competition.
HSBC’s 2025-2027 net profit forecasts now sit 8-11% below consensus estimates, with analysts suggesting the market overestimates the positive impact of the company’s IP operations on near-term financial results.
The stock currently trades at 21 times 2026 estimated earnings with a projected 12% net profit compound annual growth rate for 2025-2027, resulting in a price-to-earnings-to-growth ratio of 1.8 - significantly higher than its historical average of 1.4, leading HSBC to conclude the current valuation appears stretched.
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