Morgan Stanley: YUE YUEN IND (00551) First Three Quarters Profit Warning Likely to Put Limited Short-Term Pressure on Share Price; Rating "In-Line with the Market"

Morgan Stanley issued a research report stating that YUE YUEN IND's (00551) first three quarters profit warning is expected to put limited short-term pressure on its share price. The bank maintains an "In-Line with the Market" rating with a target price of HK$12.5. YUE YUEN IND issued a profit warning, expecting net profit for the first three quarters of this year to decline by approximately 50% to 55% year-on-year, compared with profit of nearly US$279 million in the same period of 2025. The expected decline is mainly due to negative impacts on the footwear manufacturing business from demand fluctuations, tariffs, macroeconomic uncertainty, increased labor costs driven by higher headcount and wage increases, and uneven capacity utilization. The bank estimates that the group's third-quarter net profit will range from approximately US$53 million to US$67 million, equivalent to 47% to 59% of the bank's second-half forecast and 45% to 57% of the market's second-half forecast, respectively; third-quarter net profit is expected to fall 37% to 50% year-on-year, with a median decline of 44%, broadly in line with the bank's forecast of a 45% decline in second-half net profit and the market's expectation of a 43% decline. Considering that third-quarter performance is in line with expectations and the market has already digested the negative factors, Morgan Stanley believes short-term pressure on the share price may be limited.