UBS: Yue Yuen IND (00551) 2026 outlook is conservative, target price slightly reduced to 20 Hong Kong dollars.

UBS released a research report stating that based on the sum-of-the-parts valuation method (SOTP), the target price for YUE YUEN IND (00551) has been slightly decreased from 20.3 Hong Kong dollars to 20 Hong Kong dollars. This is due to the bank lowering its sales and gross margin expectations, as well as reducing profit forecasts for 2026 to 2028 by 5% to 6%. However, this decrease is partially offset by rolling forward valuation benchmark years; rating is "Buy". UBS estimates that YUE YUEN IND's net profit in the fourth quarter of last year increased by 68% year-on-year to 102 million US dollars, exceeding the bank's expectations by 8%, mainly due to a tax dispute lawsuit victory resulting in a tax refund. However, gross margin and operating profit margins for the period were lower than the bank's expectations, mainly due to uneven production capacity, sharing tariffs with US customers, increased staff in the OEM business, and deleveraging of the retail branch POU SHENG INT'L (03813). Management's outlook for this year is conservative, with the target being a slight increase in sales by 2026.