Yamato: Lowering Yuexuan Group's target price to HK$17, lowering earnings forecast for the years 2021 and 2022.

Yamaha's research report stated that Yu Yuan Group's first-quarter contract manufacturing business revenue increased by 5.9% year-on-year, but due to uneven production levels and delays in the start-up of new factories, labor efficiency decreased, and gross profit margin decreased by 2.6 percentage points year-on-year to 17.7%. Management believes that the impact of tariffs on the group's production capacity in Vietnam and Indonesia is controllable. Due to the possibility of easing trade tensions, coupled with the group's undervaluation, the bank reiterated a "buy" rating, with a target price lowered from HK$19 to HK$17. The report quoted Yu Yuan Group's management forecast that gross profit margin will continue to be under pressure in the next two to three quarters and may normalize in the fourth quarter due to the recovery of orders. Therefore, Yamaha has lowered the group's earnings per share forecast for the next two years by 9% to reflect the downward revision of gross profit margin forecasts.