UBS Revises Down YUE YUEN IND Target Price to HK$14.5, Downgrades Rating to Neutral

Stock News06-08 14:40

UBS has issued a research report adjusting its forecasts for YUE YUEN IND (00551), citing a less certain order outlook, margin pressures, lower production efficiency, and heightened competition. Consequently, the bank has lowered its target price from HK$17.6 to HK$14.5 and downgraded its rating from "Buy" to "Neutral".

The report anticipates that elevated oil prices will negatively impact the group's gross margin in the third quarter. Furthermore, the footwear market is considered more concentrated than the apparel market, and uncertain prospects for some major brands may prompt footwear manufacturers to compete more aggressively for business from brands with clearer outlooks. This dynamic could weaken their ability to pass on higher tariffs and raw material costs. Additionally, shorter delivery lead times are expected to hamper operational efficiency, further compressing profit margins.

UBS has reduced its net profit forecasts for YUE YUEN for the 2026-2028 period by 14-19%, bringing them down to US$301 million, US$339 million, and US$353 million respectively. The bank views the current share price, trading at 8.4 times the estimated 2027 price-to-earnings ratio, as aligned with its five-year average and the global peer median, suggesting the valuation is now at a reasonable level.

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