Citi released a research report stating that it reaffirmed the “buy” rating of Yuyuan Group (00551), raised the net profit forecast for the 2024-2026 fiscal year by 20% to 22%, and raised the target price from HK$12.5 to HK$16.5 because the gross margin of the manufacturing business beat expectations. Taking into account the proceeds of a single sale, the Group's net profit for the first quarter is expected to rise 95% to 100% year-on-year under a low base. The bank believes it won expectations.
The bank pointed out that the retail business of the Yuyuan Group is still under pressure. It is expected that with consumption downgraded and purchasing power affected by the weak real estate market, retail business revenue will increase slightly this year. Management expects retail operating profit margins to be flat year-on-year this year. Furthermore, assuming that the dividend payout ratio falls to 60% this year and falls further to 56% in 2026, the current valuation predicts that this year's dividend rate will reach 9%. In addition, the compound annual growth rate of earnings per share from 2024 to 2026 is expected to reach 20%, which is very attractive.