UBS released a research report stating that the investment rating of Yuyuan Group (00551) was upgraded from “neutral” to “buy”, the 2024-2026 earnings forecast was raised by 13% to 22%, and the target price was drastically raised from HK$9.3 to HK$19. It is expected that the compound annual growth rate of earnings per share between 2023 and 2025 will reach 16%, compared to a 10% decrease from 2017 to 2023.
According to the report, the company's profits for the fourth quarter of last year and the first quarter of this year both exceeded expectations, and OEM profit margins rose to a multi-year high, based on optimism about OEM business prospects and order conditions. It is also predicted that under effective cost control in recent months, the operating profit margin of the OEM business will return to the level of 2016 to 2017, that is, before facing efficiency and supply chain issues. The bank expects that although the company's revenue may still be under pressure, strict control of discounts and costs will keep retail business operating margins resilient.