Goldman Sachs: Maintains "Neutral" rating on MAN WAH HLDGS (01999), target price lowered to HK$3

Goldman Sachs released a research report stating that MAN WAH HLDGS (01999) issued a profit warning for the first half of FY2027 ending in late September, far below expectations. The company expects net profit for the period to fall 70% to 90% year-on-year, compared with the bank's original forecast of a 31% year-on-year decline. The bank lowered its earnings per share forecasts for Man Wah for FY2027 to FY2029 by 15% to 35%, cut its target price from HK$3.5 to HK$3, and maintained its "Neutral" rating. The bank noted that, based on the warning, revenue was broadly stable. Management attributed the sharp decline in net profit to: first, cost inflation driven by rising petrochemical product prices after the Middle East conflict, coupled with intensifying competition, which dragged down gross margin; second, an earlier U.S. acquisition project recorded operating losses due to rising raw material costs and weak market demand, resulting in impairment losses on related goodwill and other intangible assets. The company has applied for bankruptcy protection for the acquired subsidiary. Excluding one-off impairment losses, the bank estimates that net profit for the first half of FY2027 fell about 60% year-on-year.