Morgan Stanley: Yue Yuen Group (00551.HK) profit warning for first three quarters expected to have limited short-term pressure on share price; rating "In-Line with the Market"

Zhitong Finance APP has learned that Morgan Stanley has issued a research report stating that Yue Yuen Industrial (Holdings) Limited's (00551.HK) profit warning for the first three quarters is expected to exert limited short-term pressure on its share price. The bank maintains an "In-Line" rating with a target price of HK$12.5. Yue Yuen Industrial issued a profit warning, expecting net profit for the first three quarters of this year to decline by approximately 50% to 55% year-on-year, compared with profit of nearly US$279 million in the same period of 2025. The expected decline is mainly due to negative impacts on the footwear manufacturing business from factors including demand fluctuations, tariffs, macroeconomic uncertainty, rising labor costs driven by an increase in employee headcount and wage increases, and uneven capacity utilization. The bank estimates that the group's third-quarter net profit will range from approximately US$53 million to US$67 million, equivalent to 47% to 59% of the bank's second-half forecast and 45% to 57% of the market's second-half forecast, respectively; 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% decline in second-half net profit and the market's expectation of a 43% decline. Considering that third-quarter performance is in line with expectations and the market has already digested the negative factors, Morgan Stanley believes that short-term pressure on the share price may be limited.