Given that Yuyuan's OEM orders have continued to improve, which proves that profit margins have improved, Goldman Sachs believes that the earlier drop in stock prices due to inventory removal was excessive.
The Zhitong Finance App learned that Goldman Sachs released a research report stating that it gave Yuyuan Group (00551) a “buy” rating, with a target price of HK$12.4. The Group's overall net profit for the fourth quarter was US$137 million, higher than Goldman Sachs's US$57 million, mainly due to better-than-expected gross margin and better-than-expected dividends.
According to the report, the gross profit margin of Yuyuan Group's OEM (OEM) production was 22.9%, up 3.6 percentage points from quarter to quarter, higher than Goldman Sachs's estimate of 18.7%. Efficiency was improved, and the quarterly Yuyuan capacity utilization rate increased by 6 percentage points compared to the previous quarter. In addition, deleveraging controls are strong, sales and administrative management controls are good, and the quarterly OEM operating profit margin is about 11%, which also beat Goldman Sachs's expectations of 4.7%.
In addition, Yuyuan's final dividend of HK$0.7 per share, with a dividend payout ratio of nearly 70% (76% in 2022), and an additional $15 million repurchase (accounting for about 5% of net profit in 2023) means that Yuyuan's dividend ratio is 11%. Goldman Sachs believes the return is attractive. Given that Yuyuan's OEM orders have continued to improve, which proves that profit margins have improved, Goldman Sachs believes that the earlier drop in stock prices due to inventory removal was excessive.