Morgan Stanley: Raises CHERVON (02285) target price to HK$22.5, rating "In-Line with the Market"

Morgan Stanley issued a research report stating that it has raised the target price of CHERVON (02285) from HK$20 to HK$22.5, maintaining an "In-Line with the Market" rating, mainly reflecting the improvement in profit margin outlook driven by a notable recovery in gross margin in the first half of 2026. The bank updated the company's first-half 2026 results and financial forecasts, and rolled its valuation forward to the earnings per share forecasts for the second half of 2026 to the first half of 2027, raising its earnings per share forecasts for 2026 to 2028 by 8% to 14%. The new target price maintains the target price-to-earnings ratio of 12x unchanged, but the valuation base has been rolled forward to the earnings forecasts for the aforementioned period. The bank believes that the company's diversified brand portfolio and channel expansion are conducive to long-term market share and profit growth, but the recovery in the DIY segment remains uncertain, and given the stock price's recent rebound from lows, the current valuation is reasonable. The bank expects a revenue compound annual growth rate of 7% and an earnings compound annual growth rate of 12% from 2026 to 2028.