Morgan Stanley: Maintains YUE YUEN IND (00551) "Equal-weight" rating, target price HK$12.5

Morgan Stanley issued a research report maintaining its "Equal-weight" rating on YUE YUEN IND (00551) with a target price of HK$12.5. The bank noted that the company issued a profit warning, expecting net profit for the first three quarters of this year to decline by approximately 50% to 55% year-on-year, compared with net profit of nearly US$279 million in the same period of 2025. The bank believes the profit decline was mainly affected by factors including demand fluctuations in the footwear manufacturing business, tariffs, macroeconomic uncertainty, rising labor costs due to an increase in headcount and wage increases, and uneven capacity utilization. Morgan Stanley estimates that YUE YUEN IND's third-quarter net profit will range from approximately US$53 million to US$67 million, equivalent to 47% to 59% of the bank's second-half net profit forecast and 45% to 57% of the market's second-half forecast. Third-quarter net profit is expected to decline by 37% to 50% year-on-year, with a median decline of 44%, broadly in line with the bank's forecast of a 45% decline in second-half net profit and the market's expectation of a 43% decline. Given that third-quarter performance was in line with expectations and the market has already digested the relevant negative factors, the bank believes the short-term pressure on the company's share price from the profit warning may be limited.