The group will build garment factories in the midwest where operating costs are low, chairman Ma Jianrong said. The factories, with a monthly production capacity of about one million pieces, will focus on embroidery and printing of garments.
Shenzhou said it also entered into a 126 million yuan agreement with the local government last month to secure water supplies for its factories. Ningbo city government will guarantee a daily supply of 40,000 tonnes per day to the group for 20 years. Price per tonne would be 1.453 yuan, down from 2.20 yuan a year before.
While water accounted for a mere 1.5 percent of the cost of production, the agreement will ensure a stable water supply.
Head of finance department Wang Cunbo said this lays the ground for furthur expansion.
The group said on Sunday interim net profit surged 39.5 percent to 265.9 million yuan from 190.6 million yuan, on a 11.7 percent increase in turnover to 1.55 trillion yuan.
"Strong growth in turnover was due to a significant growth in sales of sportswear and the expansion in the sales market," said financial controller and company secretary James Yu.
Sales of sportswear surged 94.5 percent as the company secured global brands such as Nike and Adidas as customers. Wang said this helped improve overall profit margin of 2.4 percent, as casualwear has a profit margin of 20-22 percent while that for sportswear, 25-30 percent.
Domestic sales increased 79.1 percent to 120.5 million yuan, as the run-up to the 2008 Beijing Olympic Games drove demand. Shenzhou said it signed up new customers including Kappa and Marks & Spencer. Shares of Shenzhou International closed at HK$4.12, up 4.3 percent.
