Core Viewpoint - Goldman Sachs economists predict that the RMB/USD exchange rate will reach 7.20, 7.10, and 7.00 in three, six, and twelve months respectively, indicating a potential appreciation of 3% over the next twelve months [1] Group 1: Companies Likely to Benefit from RMB Appreciation - The list of Hong Kong-listed companies that may benefit from RMB appreciation includes: GDS Holdings Limited (09698), Zijin Mining Group (02899), China Jinmao Holdings Group (00817), Dongyue Group (00189), China Southern Airlines (01055), Baidu Group (09888), China Feihe (06186), and Tencent Holdings (00700) [1] - Criteria for selection include: 1) Market capitalization over $2 billion and average daily trading volume (ADVT) exceeding $5 million 2) Industries reliant on USD imports, such as aviation, petrochemicals, construction, staple foods, and tourism, or having over 20% of debt in USD 3) Overseas revenue exposure below 30% 4) No foreign exchange gains during the RMB depreciation period in 2024 5) Low correlation of returns with exchange rate fluctuations [1] Group 2: Companies Likely to Underperform in RMB Appreciation - The list of Hong Kong-listed companies that may underperform during RMB appreciation includes: Haier Smart Home (06690), PetroChina Company Limited (00857), WuXi AppTec (03933), ASMPT Limited (00522), Yue Yuen Industrial Holdings (00551), Sinotruk (Hong Kong) Limited (03808), Shenzhou International Group Holdings Limited (02313), and Minth Group Limited (00425) [2] - Criteria for selection include: 1) Market capitalization over $2 billion and average daily trading volume exceeding $5 million 2) Overseas revenue exposure exceeding 30% 3) USD debt level below 5% 4) No foreign exchange losses during the RMB depreciation period in 2024 5) High correlation of returns with exchange rate fluctuations [2]

Group 1 - The overall micro liquidity shows a net outflow of 93 billion yuan, with margin financing turning into a net inflow of 182.44 billion yuan, indicating a recovery in investor sentiment [2][20][21] - The issuance of equity financing remains low, with a total of 40.69 billion yuan raised this period, reflecting a decrease from the previous period [20][22] - The net reduction in industrial capital has narrowed to 59.75 billion yuan, suggesting a shift in large shareholders' behavior [20][22] Group 2 - The commercial banking sector reported a net profit of 656.8 billion yuan in Q1 2025, a year-on-year decrease of 2.32%, with state-owned banks showing improved performance [4][36] - The total assets of commercial banks reached approximately 394 trillion yuan, growing by 7.20% year-on-year, indicating stable asset expansion [4] - The non-performing loan ratio stood at 1.51%, reflecting a slight increase but overall asset quality remains stable [4] Group 3 - The pharmaceutical company "药师帮" achieved a revenue of 17.904 billion yuan in 2024, with a net profit exceeding 30.01 million yuan, marking its first profitable year [5][24] - The platform business has expanded its SKU supply to over 3.9 million, while the number of registered downstream buyers has surpassed 827,000 [24][25] - The company forecasts revenues of 20.693 billion yuan, 24.215 billion yuan, and 28.689 billion yuan for 2025-2027, with net profits projected at 1.56 billion yuan, 3.73 billion yuan, and 6.02 billion yuan respectively [26] Group 4 - "伟测科技" reported a revenue of 1.077 billion yuan in 2024, with a year-on-year growth of 46%, and a net profit of 128 million yuan, reflecting a strong recovery in the semiconductor testing industry [31][32] - The company plans to enhance its testing capacity through the construction of new facilities, aiming to significantly increase its service capabilities [33] - The revenue from wafer testing reached 615 million yuan, growing by 38.91%, while finished chip testing revenue was 367 million yuan, up by 50.07% [33] Group 5 - "华明装备" achieved a total revenue of 2.322 billion yuan in 2024, with a year-on-year increase of 18.41%, and a net profit of 614 million yuan, up by 13.25% [9] - The company has expanded its overseas market presence, with new facilities in Indonesia and Singapore, enhancing its service capabilities in Southeast Asia [9] - The successful operation of its high-voltage products marks a significant milestone in achieving domestic production capabilities [9] Group 6 - Alibaba's revenue for FY25Q4 reached 236.5 billion yuan, with adjusted EBITDA of 41.8 billion yuan, indicating strong performance across its business segments [16][27] - The cloud business generated 30.1 billion yuan in revenue, driven by rapid growth in public cloud services and AI-related products [28][29] - The company expects revenues of 1,035.3 billion yuan, 1,105.7 billion yuan, and 1,179.8 billion yuan for FY2026-2028, with net profits projected at 180.7 billion yuan, 185.9 billion yuan, and 195.7 billion yuan respectively [30]

Investment Rating - The report maintains a "Buy" rating for the company with a target price yet to be specified [5][4] Core Views - The company reported a 1% year-on-year increase in revenue for Q1 2025, reaching $2 billion, while gross margin decreased by 2.2 percentage points to 23%. Net profit attributable to shareholders fell by 24% to $80 million [1] - Manufacturing revenue grew by 6% year-on-year, but gross margin declined to 18%, a drop of 2.6 percentage points, with net profit down 25% year-on-year. Retail revenue decreased by 5%, with a gross margin of 33% and a 21% decline in net profit [1] - The overall revenue for April 2025 showed a 1% year-on-year increase, with manufacturing revenue up 11% and retail business still in recovery [1] Summary by Sections Manufacturing (Q1 2025) - Revenue from the U.S. increased by 14%, accounting for 29% of total revenue, while Europe saw an 11% increase, making up 27%. However, revenue from mainland China dropped by 19%, representing 15% of total revenue [2] - The total shipment volume of footwear rose by 5% to 62 million pairs, with an average selling price (ASP) increase of 3% to $20, benefiting from a better order mix [2] - Major production regions include Indonesia (55% of total shipments), Vietnam (31%), and mainland China (10%), with Indonesia and Vietnam showing shipment increases of 4% and 13% respectively, while mainland China experienced an 8% decline [2] Retail (Q1 2025) - The company operated 3,437 direct stores, a decrease of 1% year-on-year [3] - Inventory turnover days increased by 19 days to 138 days [3] Financial Forecast - The company forecasts revenues of $8.4 billion, $8.9 billion, and $9.5 billion for the years 2025 to 2027, with net profits of $400 million, $430 million, and $480 million respectively. Corresponding EPS is projected to be $0.25, $0.27, and $0.30, with PE ratios of 6x, 6x, and 5x [4]

Investment Rating - The investment rating for the company is "Buy" [6] Core Insights - The company reported a Q1 2025 revenue of $2.03 billion, a year-on-year increase of 1.3%, with a net profit of $75.76 million, down 24.2% year-on-year. The manufacturing segment generated $1.33 billion in revenue, up 5.9% year-on-year, while the retail segment saw revenue of $700 million, down 6.5% year-on-year [1][2][4] Summary by Sections Manufacturing Business - The manufacturing segment's revenue reached $1.33 billion in Q1 2025, with a shipment volume of 61.9 million pairs, reflecting a 5.3% increase year-on-year. The average selling price (ASP) was $20.00, down 2.5% year-on-year. Revenue in April 2025 increased by 10.5% year-on-year, supported by strong orders from key clients like Adidas and Asics [2][3] - The capacity utilization rate was 91% in Q1 2025, up 3 percentage points year-on-year. However, uneven capacity loading and rising labor costs pressured profit margins, leading to a gross margin of 17.7%, down 2.6 percentage points year-on-year [3] Retail Business - The retail segment reported revenue of $700 million in Q1 2025, a decrease of 6.5% year-on-year. The number of offline stores decreased to 3,437, with same-store sales down 13.9% due to weak foot traffic and store closures. Conversely, online retail revenue grew by 20% year-on-year, with live-streaming sales surging by 230% [4] - The gross margin for the retail segment was 32.7%, down 0.5 percentage points year-on-year, while the net profit margin was 2.7%, down 0.5 percentage points [4] Earnings Forecast and Valuation - The company is expected to achieve revenues of $8.5 billion, $9.0 billion, and $9.6 billion for the years 2025, 2026, and 2027, respectively, representing year-on-year growth rates of 3%, 6%, and 7%. The net profit is projected to be $410 million, $460 million, and $520 million for the same years, with corresponding growth rates of 5%, 13%, and 12% [5][11]

Investment Rating - The investment rating for the company is "Buy" [6] Core Views - The company reported a Q1 2025 revenue of $2.03 billion, a year-on-year increase of 1.3%, with a net profit of $75.76 million, down 24.2% year-on-year. The manufacturing segment generated $1.33 billion in revenue, up 5.9% year-on-year, while the retail segment saw revenue of $700 million, down 6.5% year-on-year [1][2][4] Summary by Sections Manufacturing Business - The manufacturing segment's revenue reached $1.33 billion in Q1 2025, with a shipment volume of 61.9 million pairs, reflecting a 5.3% year-on-year increase. The average selling price (ASP) was $20.00, down 2.5% year-on-year. Revenue in April 2025 increased by 10.5% year-on-year, supported by strong orders from key clients like Adidas and Asics [2][3] - The capacity utilization rate was 91% in Q1 2025, up 3 percentage points year-on-year. However, uneven capacity loading and rising labor costs pressured profit margins, leading to a gross margin of 17.7%, down 2.6 percentage points year-on-year [3] Retail Business - The retail segment generated $700 million in revenue, down 6.5% year-on-year, primarily due to weak consumer demand in China and a decline in foot traffic. Online retail revenue, however, grew by 20% year-on-year, with live-streaming sales increasing by 230% [4] - The gross margin for the retail segment was 32.7%, down 0.5 percentage points year-on-year, while the net profit margin was 2.7%, down 0.5 percentage points [4] Earnings Forecast and Valuation - The company expects to achieve revenues of $8.5 billion, $9.0 billion, and $9.6 billion for the years 2025, 2026, and 2027, respectively, with year-on-year growth rates of 3%, 6%, and 7%. The net profit is projected to be $410 million, $460 million, and $520 million for the same years, corresponding to growth rates of 5%, 13%, and 12% [5][11]

Investment Rating - The investment rating for the company is "Buy" [1] Core Views - The company reported Q1 2025 revenue and net profit attributable to shareholders of $202.9 million and $7.6 million, respectively, showing a year-on-year growth of 1.3% and a decline of 24.2%, which was below market expectations [2] - The decline in net profit was primarily due to uneven capacity utilization across manufacturing plants, inefficiencies in production, and rising labor costs due to increased hiring and wage inflation [2] - The manufacturing ASP (Average Selling Price) turned positive after five consecutive quarters of decline, driven by a favorable order mix [3] - The retail business saw a further decline in revenue in April 2025, with a year-on-year decrease of 7.7% [4] - The company is positioned as a global leader in athletic shoe manufacturing, benefiting from a strong market share among top sports brands and a vertically integrated supply chain [5] Summary by Sections Financial Performance - Q1 2025 manufacturing revenue and net profit were $132.8 million and $6.4 million, respectively, with year-on-year changes of +5.9% and -24.6% [3] - The gross margin for Q1 2025 was 17.7%, a decrease of 2.6 percentage points year-on-year, attributed to uneven capacity utilization and rising labor costs [3] - The company forecasts revenue for 2025-2027 to be $8.69 billion, $9.09 billion, and $9.43 billion, respectively, with a downward adjustment in net profit estimates to $460 million, $520 million, and $560 million [5][7] Retail Business - The retail segment reported Q1 2025 revenue and net profit of $51.07 million and $1.38 million, respectively, reflecting a year-on-year decline of 5.4% and 20.7% [4] - The number of direct-operated stores decreased by 1.3% year-on-year to 3,437, with 11 stores closed compared to the end of 2024 [4] Investment Outlook - Short-term challenges include potential impacts from tariffs and inflation on consumer confidence, particularly affecting Q3 orders [5] - The company is expected to maintain low to mid-single-digit growth in orders for the year, supported by capacity expansion and positive price growth [5] - Long-term, the company has room for improvement in net profit margins compared to peers [5]

Group Financial Performance - Yue Yuen Group's revenue increased by 1.3% YoY to $2,029.5 million in 1Q25 [12, 48] - Profit attributable to owners decreased by 24.2% YoY to $75.8 million [37, 48] - Gross profit margin decreased by 2.2 percentage points to 22.9% [37, 48] Manufacturing Business - Manufacturing revenue increased by 5.9% YoY to $1,328.3 million in 1Q25 [37, 42, 61] - Shoe volume increased by 5.3% YoY to 61.9 million pairs [36, 44] - Average selling price (ASP) increased by 2.5% YoY to $20.04 per pair [36] - Manufacturing gross profit margin decreased by 2.6 percentage points to 17.7% [36, 37, 61] - Capital expenditure increased significantly by 239.2% YoY to $67.5 million [49, 83] Retail Business - Pou Sheng - Pou Sheng's revenue decreased by 5.4% YoY in RMB terms [37, 41] - Pou Sheng's online contribution reached a historical high, accounting for 32% of total sales, up 20% YoY [40, 93] - Profit attributable to owners of Pou Sheng decreased by 20.7% YoY [37, 94] - Same Store Sales Growth increased 13.9% YoY [93]

Core Viewpoint - The company reported a decline in net profit and overall gross margin, attributed to various operational challenges and increased labor costs, despite a slight increase in revenue [1][2]. Financial Performance - For the three months ending March 31, 2025, the company's revenue was $2.029 billion, a year-on-year increase of 1.29% [1]. - The net profit attributable to shareholders was $75.758 million, representing a year-on-year decrease of 24.22% [1]. - The overall gross profit fell by 7.7% to $464 million, with the gross margin decreasing by 2.2 percentage points to 22.9% [1]. Manufacturing Business Insights - The gross profit from the manufacturing segment decreased by 7.6% to $235 million, with the gross margin dropping by 2.6 percentage points to 17.7% [1]. - The demand for footwear products continued to show positive trends, with order volumes increasing and average selling prices rebounding after five consecutive quarters of decline [1]. Operational Challenges - The company faced uneven capacity utilization across manufacturing sites, leading to inefficiencies and increased labor costs due to a 7.5% year-on-year rise in workforce numbers and significant wage increases [2]. - New production lines and shoe upper processing plants did not ramp up as expected, impacting production efficiency and cost management [2]. Retail Performance - The retail subsidiary, Bao Sheng International, continued to enhance its omnichannel capabilities, with online sales trends outperforming offline retail despite a challenging competitive environment [2]. - The company managed to improve the sales conversion rate of its retail stores, dynamically managing store portfolios to optimize performance [2].

Financial Performance - The company reported an unaudited consolidated profit attributable to shareholders of approximately $75.8 million for the three months ended March 31, 2025, down from $99.965 million in the same period last year, representing a decrease of 24.2%[4] - The overall gross profit for the three months ended March 31, 2025, was $464.3 million, down from $503.1 million in the previous year, indicating a decline of 7.7%[4] - The company's attributable profit was $75.8 million, a decrease of 24.2% compared to $100.0 million in the same period last year[14] - The company recorded a profit of $15.8 million from joint ventures and associates, slightly down from $16.2 million in the previous year[13] - The company’s total comprehensive income for the period was $91.9 million, compared to $80.6 million in the same period last year, an increase of 14.5%[5] - The company reported a non-recurring loss of $0.5 million, compared to a non-recurring profit of $0.4 million in the same period last year[14] Revenue and Sales - Revenue for the three months ended March 31, 2025, was $2,029.5 million, an increase of 1.3% compared to $2,003.6 million in the same period last year[8] - The total revenue from manufacturing activities, including footwear, soles, accessories, and others, was $1,328.3 million, reflecting a 5.9% increase year-on-year[9] - Revenue from the retail subsidiary, BaoSheng International, decreased by 6.5% to $701.2 million, compared to $749.7 million in the same period last year[9] - Total revenue for the three months ended March 31, 2025, was $2,029.5 million, a 1.3% increase from $2,003.6 million in the same period last year[10] Cost and Expenses - Gross profit decreased by 7.7% to $464.3 million, with a gross margin decline of 2.2 percentage points to 22.9%[11] - Sales and distribution expenses fell by 4.3% to $206.7 million, accounting for approximately 10.2% of total revenue[12] - The company experienced a 7.5% year-on-year increase in workforce, contributing to higher labor costs amid rising wages[7] - Other income decreased by 15.9% to $31.2 million, representing about 1.5% of total revenue[12] - The company’s financing costs decreased to $13.3 million from $17.1 million, a reduction of 22.1%[4] Market and Strategic Outlook - The company noted that the competitive e-commerce environment in mainland China continues to impact retail performance, with fluctuating customer traffic affecting sales conversion rates[7] - The company remains optimistic about the long-term prospects of the sports industry despite short-term economic uncertainties affecting order visibility for the second half of 2025[15] - The company plans to diversify its manufacturing capacity in Indonesia and India to support sustainable growth[15] - The company aims to enhance operational resilience and maintain healthy cash flow through rigorous cost control and long-term digital transformation strategies[16] Footwear Manufacturing - The footwear manufacturing revenue increased by 7.8% to $1,239.5 million, with a shipment volume rise of 5.3% to 61.9 million pairs, and an average selling price increase of 2.5% to $20.04 per pair[9]

Financial Performance - Revenue rose by 3.7% to $8,182.2 million compared to $7,890.2 million in 2023[10] - Profit attributable to owners increased by 42.8% to $392.4 million, up from $274.7 million in the previous year[10] - Basic earnings per share rose by 42.9% to 24.37 cents, compared to 17.05 cents in 2023[10] - The company reported a significant increase in orders, contributing to improved production efficiency and capacity utilization[30] - The company's overall revenue increased by 3.7% to approximately $8.2 billion, driven by strong performance in the manufacturing business[31] - The company reported a 42.8% increase in profit attributable to shareholders, reaching approximately $392.4 million[32] - The manufacturing business's total revenue was $5,620.8 million, reflecting an 11.1% increase from the previous year[49] - Gross profit rose by 3.5% to $1,992.7 million, with an overall gross margin of 24.4%[57] - The group achieved a gross profit margin of 24.4% for the fiscal year 2024, maintaining the same level as in 2023, while the operating profit margin increased to 6.7% from 5.1% in 2023[181] - The net profit margin improved to 5.2% in 2024, up from 3.9% in 2023, indicating a positive trend in profitability[181] Cash Flow and Dividends - Free cash flow decreased by 56.2% to $325.8 million, down from $744.1 million in 2023[10] - Cash flow from operating activities was $537.1 million, down from $944.7 million in 2023[66] - The company declared a total annual dividend of 1.30 HKD per share, a 44.4% increase from 0.90 HKD in 2023[10] - The board has declared a final dividend of HK$0.90 per share for 2025, up from HK$0.70 per share in 2023, resulting in a total annual dividend of HK$1.30 per share[81] - The company declared an interim dividend of HKD 0.40 per share for the six months ending June 30, 2024, and proposed a final dividend of HKD 0.90 per share, totaling approximately HKD 1,444,094,000, subject to shareholder approval[111] Operational Efficiency - The gross profit margin for the manufacturing business improved by 0.7 percentage points to 19.9%, achieving the highest operating profit margin since 2010[31] - Retail sales in the Greater China region decreased by 8.0% year-on-year in RMB terms, reflecting weak consumer confidence[30] - The company aims to fully implement the SAP ERP system and integrated operation platform by 2025 to enhance production efficiency[33] - The company is focusing on digital transformation and smart manufacturing to enhance short-term and long-term profitability[33] - The company plans to focus on optimizing store efficiency and selectively adjusting or renovating stores as part of its refined retail strategy[51] Market Trends and Demand - Total footwear shipments increased by 16.9% year-on-year to 255.3 million pairs in 2024[10] - Global footwear demand showed a significant recovery, with Vietnam's footwear exports rising by 13.0% to $22.9 billion in 2024[30] - The company’s sports/outdoor footwear accounted for 53.8% of total revenue, while casual shoes and sports sandals made up 9.4%[52] Sustainability and ESG - The company received a "BB" rating from MSCI ESG and improved its scores in various sustainability assessments, outperforming 87% of companies in the textile, apparel, and luxury goods sector[35] - The company’s ESG score improved to 48 in 2024 from 41 in 2023, outperforming 87% of companies in the textile, apparel, and luxury goods sector[45] - The company aims to achieve a 46.2% reduction in absolute greenhouse gas emissions by 2030, using 2019 as the baseline year[184] - The group plans to achieve carbon neutrality by 2025 through the procurement of renewable energy and enhancing energy efficiency[184] Employee and Governance - The group employed approximately 285,500 employees as of December 31, 2024, a 7.9% increase from 264,700 employees in 2023[83] - The board of directors includes a mix of executive and independent non-executive members, ensuring a diverse governance structure[121] - The company emphasizes the importance of employee development and communication channels, including internal websites and surveys, to enhance talent capital and sustainable competitiveness[189] Risk Management - The company has established a risk management framework to address various operational risks, including labor law compliance and data security, by hiring local experts and implementing high-security communication systems[195][197] - The company is focused on diversifying its revenue sources by continuously analyzing brand client orders and exploring new brands and profit sources to mitigate operational risks[198] - The company is prepared to activate contingency plans in response to significant events or abnormal price fluctuations affecting operational costs[200] Capital Expenditure and Investments - The group’s total capital expenditure for 2024 is $211.3 million, an increase from $200.6 million in 2023, with manufacturing capital expenditure at $159.8 million, up from $152.0 million[72] - The group plans to invest approximately ₹23 billion (approximately $276 million) in a production base in an economic zone in Tamil Nadu, India, with the project already underway[73] - The company invested $142.2 million in product development, focusing on innovation and sustainable materials[62] Shareholder Relations - The total number of issued shares is 1,604,556,486 shares[135] - The company has adopted stock option and share award plans to incentivize directors and eligible employees, aligning their interests with the company's performance[127] - The company confirmed a net expense of $2,766,000 related to the Yu Yuan Share Incentive Plan for the year ending December 31, 2024, as equity-settled share-based payments[147]