Citi: Cuts MAN WAH HLDGS (01999) target price to HK$3.6, maintains "Buy" rating.

Citi issued a research report stating that MAN WAH HLDGS (01999) earlier issued a profit warning, expecting net profit for the six months ended September 2026 to decline by 70% to 90% year-on-year. The bank still maintains a "Buy" rating, with the target price cut from HK$5.6 to HK$3.6, but noted that MAN WAH HLDGS remains the only company in Citi's China home furnishings sector to receive a "Buy" rating, while maintaining a "Sell" rating on peers Oppein Home Group Inc. and Suofeiya Home Collection. Citi pointed out that the group's profit decline in the first half of the fiscal year was mainly affected by rising chemical raw material prices and a one-off impairment from the acquisition of the U.S. business Southern Motion in December 2025. Citi expects that, as no related impairment will be recorded in the second half of the fiscal year and the launch of new products will drive an increase in average selling prices, net profit in the second half of the fiscal year is expected to rebound by about 1.8 times from the first half to HK$664 million, with full-year net profit forecast at HK$894 million, rising to HK$1.796 billion in 2027. Citi believes that MAN WAH HLDGS holds a dominant position in the functional sofa markets in China and the United States. Benefiting from stable replacement demand in the Chinese and U.S. markets and the continuous increase in functional sofa penetration, the bank believes that MAN WAH HLDGS is expected to gradually improve its profitability after completing the restructuring of its U.S. business.