Yue Yuen Industrial (Holdings) Ltd (HKG: 00551) climbed more than 3% intraday, and as of the time of writing, its shares are up 2.07% at HK$13.34, with turnover of HK$17.4665 million.
Recently, Yue Yuen Industrial issued a profit warning for its third-quarter results. Morgan Stanley pointed out that the company expects net profit for the first three quarters of this year to fall by about 50% to 55% year-on-year, while net profit in the same period of 2025 was close to US$279 million.
The bank believes the profit decline was mainly affected by factors including fluctuating demand in the footwear manufacturing business, macroeconomic uncertainty, higher labor costs due to an increase in employee headcount and wage increases, and uneven capacity utilization.
Morgan Stanley estimates that Yue Yuen Industrial's third-quarter net profit will range from about US$53 million to US$67 million, equivalent to 47% to 59% of the bank's second-half net profit forecast and 45% to 57% of the market's second-half forecast. Third-quarter net profit is expected to fall 37% to 50% year-on-year, with a median decline of 44%, broadly in line with the bank's forecast of a 45% drop in second-half net profit and the market's expected 43% decline.
Given that third-quarter performance was in line with expectations and the market has already digested the relevant negative factors, the bank believes the short-term pressure on the company's share price from the profit warning may be limited.
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