Citigroup maintains a "neutral" rating on YIHAI INTL (01579) with a target price raised to HK$16.6

Citibank released a research report stating that it has raised its net profit forecast for YIHAI INTL (01579) for 2026 and 2027 by 19% to reflect an increase in gross profit margin and operating profit margin. The target price has been raised from HK$14.4 to HK$16.6, maintaining a "Neutral" rating. YIHAI INTL's net profit in the second half of last year increased by 26% year-on-year, significantly exceeding expectations compared to the flat performance in the first half. Although revenue growth was weak, rising only 2% in the second half, it was in line with market forecasts. The significant improvement in gross profit margin and the decrease in sales, general, and administrative expenses as a proportion of sales brought positive surprises to the market. The report quoted YIHAI management as saying that in addition to the decrease in raw material costs, supply chain efficiency has also improved, partially reflected in the reduction in the number of employees due to the improvement in production automation. Management expects that the improvement in efficiency will continue to drive an increase in the company's gross profit margin in the first half of the year, but the rise in raw material costs could pose a risk in the second half of the year, and the current competitive outlook is also uncertain.