Goldman Sachs: Raised target price for Yue Yuen Industrial (00551) to HK$21, lowered target price for its subsidiary Pou Sheng International (03813) to HK$0.87, both maintaining a "buy" rating.

Goldman Sachs has released a research report stating that the target price of Yue Yuen IND (00551) has been raised by 22.1%, from HK$17.2 to HK$21, while the target price of its subsidiary POU SHENG INT'L (03813) has been lowered by 13%, from HK$1 to HK$0.87. Both stocks are recommended as "buy". The bank mentioned that it has lowered the net profit forecast for POU SHENG INT'L for the years 2024-2026 by 19-31%, mainly due to pressure on sales, gross profit margin, and operating profit margin. As for Yue Yuen IND's original equipment manufacturing (OEM) business, the sales, gross profit margin, and operating profit margin forecasts have been slightly increased, resulting in an upward adjustment of profit forecasts for 2024-2026 by 13-18%, benefiting from healthy order growth and an expected good dividend yield of around 9% in 2025. Goldman Sachs noted that Yue Yuen IND, as an OEM, has shown strong growth since October. The OEM performance in the third quarter exceeded expectations, with management increasing its guidance for the 2024 fiscal year to an order volume increase of around 16% (previously low double-digit growth), which was a huge surprise. Its subsidiary, Pao Sheng, saw flat sales on Double Eleven, and is still optimizing its store network and lease agreements, aiming to further narrow the profit margin gap between online and offline channels.