VS China made up the period's growth – Attributable profit ex-restructuring costs surged 46.7% YoY to HK$590mn for FY3/26, thanks to the strong performance of VS China, a 49% JV with Victoria Secret. VS China’s net profit skyrocketed 513% YoY as localized products and marketing initiatives paid off. That not only mitigate the drop in operating profit but contributing to all the YoY profit gain for the year. The company declared a final dividend of 5.3 HK cents bringing the full-year pay-out ratio to 47.6%.

Revenue edged down 1.6% YoY to HK$7.72bn during the period, as client orders softened against a backdrop of elevated tariffs and subdued consumer sentiment. All product segments saw GPM pressure as blended GPM contracted by 90bps to 22.5% from 23.4% last year. Operating margin slid 1.5 ppts to 5.3% due to stringent cost structures.

Bonding products maintain strong momentum – The two core business segments, intimate wear and sports products, together accounted for 94.4% of total revenue (54.4% and 40.0%, respectively) and performed solidly overall. The intimate wear segment saw a slight decline due to reduced client orders, yet business from key US clients maintained double-digit YoY growth. The sports products segment recorded MSD growth, driven primarily by Bonding products (apparel made using proprietary patented bonding craftsmanship), which generated HK$1.46bn in revenue, up ~25% YoY and representing ~19% of total revenue. Management expects Bonding products to remain a key growth engine, contributing sustained revenue expansion and improved overall profitability.

FY3/27 starts with positive outlook – As the market gradually absorbs tariff fluctuations, order visibility and stability have improved compared with the prior year. For the first half of FY27, visible orders for core businesses are expected to deliver mid-to-high single-digit YoY growth, marking the strongest momentum in the past four years, while the second half is also viewed positively. Intimate wear orders have returned to growth, establishing a solid foundation for the business. Victoria’s Secret, the company’s long-term partner, remains the largest client and a key incremental contributor. Benefiting from the Bonding products trend, sports product orders maintain double-digit growth, and key sportswear brand projects are progressing well.

Our view – Given the upbeat order outlook and diminishing tariff headwinds, we expect a mid-to-high single-digit revenue recovery and modest profit improvement in FY3/27. Core GPM is expected to gradually improve, supported by stabilizing raw material costs and stronger pricing power. The company plans to add another 2,000 workers (+6.9%) in its Vietnam facilities, raising production capacity utilisation from 80% to 90% to meet rising demand. Key concerns remain, including volatility in Vietnam’s energy and raw material costs (influenced by Middle East conditions) and continued RMB appreciation against the USD. The stock currently trades at 4.7x FY3/27E P/E. (Amelia Deng)