Shares of Yue Yuen Industrial (Holdings) Ltd (SEHK: 00551) fell close to 3% in recent trading. At the time of writing, the stock was down 2.83% to HK$13.75, with a turnover of HK$18.542 million.
The decline follows the company's recent announcement regarding its May performance. The group reported a consolidated net operating revenue of $694 million for May, representing a year-on-year decrease of 2.39%. For the cumulative five-month period ended May 31, 2026, the consolidated net operating revenue totaled $3.375 billion, a slight decline of 0.76% compared to the same period last year.
Analyst Outlook on Margins
Analysts at UBS have expressed concerns about the company's near-term profitability. They anticipate that high oil prices will continue to exert pressure on Yue Yuen Industrial's gross margin in the third quarter of 2026. The firm has implemented measures to counter rising oil costs, such as passing costs directly to brand customers through designated suppliers, re-pricing new orders, and building up inventory. However, UBS notes that the company's low-cost inventory is likely to be depleted by the end of June, while negotiations with brand partners on price adjustments are still ongoing.
Seasonal Challenges Ahead
Adding to the headwinds, the third quarter is typically a seasonally weaker period for the company. UBS suggests that capacity utilization will depend on the ability to pull forward orders from the fourth quarter. Given the uncertain outlook for some brand customers, the brokerage views this as a challenging task.
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