[ET Net News Agency, 16 April 2018] HSBC Global Research lowered its target price for
Yue Yuen Industrial (00551) to HK$28 from HK$34.3, and reiterated its "hold" rating.
The research house said the latest update from management re-affirmed HSBC's concerns
about soft top line and low margin visibility. For OEM, management expect a
mid-single-digit decline in sales as they adjust to customers' demand in shorter lead
times. They expect gross margin to be under pressure given the change in ordering
patterns, higher raw materials costs and unfavourable FX. For retail, they see EBIT margin
at 3.5-4% (from 4.1% in 2017) given business transformation.
On top of these, HSBC said it is surprised by the speed of the business transformation
that management intends to carry out. As such, it factored in lower margins into its
numbers. However, it believes share price downside is limited from here given a 5%
dividend yield. (KL)