HAITONG INT'L: Cuts YOFC (06869) target price by 39.2% to HK$144, maintains "Outperform" rating

HAITONG INT'L released a research report stating that it has cut YOFC's (06869) target price by 39.2% from HK$237 to HK$144, maintaining an "Outperform" rating. The bank raised its forecasts for the company's net profit attributable to shareholders for fiscal years 2026 to 2028 to RMB9.1 billion, RMB13.1 billion, and RMB11.2 billion, respectively, mainly due to an upward revision of the business volume base based on actual results for the first three quarters, and it still expects fiscal year 2027 to be the earnings peak. YOFC's third-quarter revenue was RMB9.316 billion, up 139.4% year-on-year and up 52.4% quarter-on-quarter, 10.6% above the market consensus; net profit attributable to shareholders was RMB3.203 billion, in line with expectations. Gross margin fell 3.2 percentage points quarter-on-quarter to 57.4%, 4.6 percentage points below the market consensus. Recurring profit rose 53.7% quarter-on-quarter to RMB3.056 billion, far above the RMB2 billion baseline set by the bank in its first-half review. Earnings for the first three quarters have already reached 88% of the bank's forecast for the company's fiscal year 2026. HAITONG INT'L pointed out that YOFC's earnings growth in fiscal year 2027 will still be price-driven. Due to capacity constraints, the bank expects business volume to grow 10%, while contract prices will move toward spot prices. The bank expects that with new capacity coming on stream in the second half of fiscal year 2027, spot prices will fall 24%, leading to a 14% decline in earnings in fiscal year 2028. The bank's earnings per share forecasts for the company for fiscal years 2026 and 2027 are 13% and 10% above consensus, respectively, while its fiscal year 2028 forecast is 19% below.