Goldman Sachs: Rated Yue Yuen Ind (00551) as "Buy" with a target price of 12.4 Hong Kong dollars.

Goldman Sachs has released a research report stating that YUE YUEN IND (00551) has a "buy" rating with a target price of HK$12.4. The overall net profit of the group in the fourth quarter was $137 million, higher than Goldman Sachs' estimate of $57 million, mainly due to better-than-expected gross profit margin and dividend distribution. The report mentions that the OEM production gross profit margin of YUE YUEN IND is 22.9%, an increase of 3.6 percentage points from the previous quarter, higher than Goldman Sachs' expected 18.7%. Efficiency has improved, with Yuyuan's capacity utilization rate increasing by 6 percentage points from the previous quarter. Strong deleveraging control, good sales and administrative management control, and an OEM operating profit margin of about 11% in the quarter also exceeded Goldman Sachs' expectation of 4.7%. In addition, Yuyuan paid a year-end dividend of HK$0.7 per share, with an annual dividend of HK$0.9 per share, representing a payout ratio of nearly 70% (76% in 2022). In addition, there was a $15 million buyback (accounting for approximately 5% of the net profit in 2023), implying a dividend yield of 11% for Yuyuan, which Goldman Sachs finds attractive. Considering Yuyuan's improving OEM orders, proving profit margin improvement, Goldman Sachs believes that the previous stock price decline due to destocking was excessive.