YUE YUEN IND (00551) has issued a profit warning, expecting its first-quarter profit attributable to shareholders to decrease by approximately 50% to 55% year-on-year for the period ending March 31. Last year's corresponding profit was $75.8 million. Based on this projection, the first-quarter net profit is estimated to be between $34 million and $37.9 million. This figure represents only 19% to 21% of the brokerage's forecast for the first half of the year, and 23% to 25% of the market's consensus forecast for the first half, indicating a significant underperformance relative to expectations. The profit decline primarily reflects negative impacts faced by the footwear manufacturing business. These include a 5.5% year-on-year sales decline in the manufacturing segment due to macroeconomic uncertainty and tariff sharing, increased labor costs from a larger workforce and wage hikes, as well as production bottlenecks and weakened efficiency. It was further noted that YUE YUEN IND had previously indicated that seasonal mismatches would lead to margin volatility. The brokerage continues to view footwear OEM (Original Equipment Manufacturing) margins as a key risk, supporting a cautious outlook for 2026. Despite the profit warning, it is believed that the market had largely anticipated these issues, and therefore, significant near-term pressure on YUE YUEN IND's share price is expected to be limited. The firm maintains an "In-Line" rating with a target price of HK$17.5.