On Wednesday, Citi updated its stance on Yue Yuen Industrial (Holdings) Limited (551:HK) (OTC: YUEIY), raising the stock price target to HK$12.50 from the previous HK$12.00 while sustaining a Buy rating on the stock. This adjustment follows Yue Yuen's announcement of its 2023 financial results, which surpassed Citi's and other market analysts' expectations.
The company reported an attributable net profit of $274 million for the year, a 7.3% decline from the previous year. However, this figure exceeded Citi's projection of $193 million as well as the consensus estimate of $188 million. Yue Yuen's revenue saw a 12.0% year-on-year decrease, totaling $7.89 billion, aligning with forecasts by Citi and other market analysts.
The better-than-expected profit was primarily attributed to a gross margin (GM) increase on a quarter-over-quarter basis in both the manufacturing (MFG) and Retail segments. The management credited this performance to improved cost control and efficiency gains. In light of these results, Citi has upgraded its earnings estimates for Yue Yuen by 15% for 2024 and 2% for 2025.
Citi's continued endorsement of a Buy rating for Yue Yuen is based on the company's attractive dividend yield, which is over 10% as per the 2023 declared dividend per share (DPS). This assessment reflects Citi's confidence in the company's financial health and its ability to deliver value to shareholders.
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