HK Stock Market Move | YUE YUEN IND (00551) rose and then fell nearly 5%, with tax disputes weighing down full-year profits. Citigroup says limited room for gross margin expansion.

YUE YUEN IND (00551) surged after its performance announcement, but fell back in the afternoon, dropping nearly 5%. As of the time of writing, it is down 4.77% to HK$14.38, with a trading volume of HK$1.5 billion. In terms of news, YUE YUEN IND has released its annual performance for the 24th year, with the group recording operating income of US$8.18 billion, an increase of 3.7% year-on-year; the attributable net profit to owners of the company was US$392 million, an increase of 42.8% year-on-year. Huaxi pointed out that the company's performance was lower than the lower limit of the performance forecast mainly due to tax disputes, with a total impact of US$41 million on the 24th year's performance. After adding back, the net profit attributable to shareholders is US$4.33 billion, an increase of 57.4% year-on-year. Citigroup released a research report stating that due to customer replenishment support, after a significant expansion in the gross profit margin of YUE YUEN IND's manufacturing business last year, the potential for further expansion in the gross profit margin is limited. Due to cautious demand prospects, the bank has lowered its profit forecast for YUE YUEN IND for the 2025 to 2026 fiscal year by 7% to 10%, and also reduced the target price of the stock from HK$16.8 to HK$15.8. The bank currently maintains a "neutral" rating on the stock.