UBS has released a research report indicating a slight reduction in the target price for YUE YUEN IND (00551) to HK$20 from HK$20.3, based on a sum-of-the-parts (SOTP) valuation. This adjustment follows a 5% to 6% cut in profit forecasts for 2026 to 2028, driven by lowered expectations for sales volume and gross margin, partially offset by rolling the valuation base year forward. The bank maintains a "Buy" rating on the stock.

UBS estimates that YUE YUEN IND's net profit for the fourth quarter of last year increased by 68% year-on-year to USD 102 million, surpassing the bank's expectations by 8%. This outperformance was primarily attributed to an income tax rebate received following a favorable ruling in a tax dispute. However, both gross margin and operating margin for the quarter fell short of UBS's forecasts, due to uneven production capacity, shared tariff costs with U.S. customers, increased staffing in the OEM business, and operational deleveraging at its retail subsidiary, Pou Sheng International (03813).

Management has provided a conservative outlook for the current year, with a target of achieving slight sales growth by 2026.