Investment Rating - The report assigns an "Buy" rating for the company, indicating strong potential for growth and recovery in profits driven by robust manufacturing demand and retail adjustments [4][7][66]. Core Insights - The company, Yu Yuan Group, is recognized as a leading global footwear manufacturer with a strong retail presence, benefiting from a diversified business model that includes both manufacturing and retail operations [6][18]. - The manufacturing segment is experiencing a recovery in profit margins due to increased demand from overseas sports brands, with capacity utilization reaching 92% in Q3 2024, leading to improved operational efficiency [6][41]. - The retail segment is expected to gradually recover as domestic demand improves, with the company diversifying its brand portfolio to include emerging high-growth sports brands [6][50]. Summary by Sections 1. Company Overview - Yu Yuan Group was established in 1988 and listed on the Hong Kong Stock Exchange in 1992, with manufacturing bases in multiple countries including Vietnam, Cambodia, and Indonesia [18]. - The company operates in both manufacturing and retail sectors, with a significant shareholding in Bao Sheng International for retail operations in Greater China [18]. 2. Manufacturing Business - The global demand for sports footwear is on the rise, with the company solidifying its position as a key supplier to major brands like Nike and Adidas [28]. - The manufacturing segment contributes approximately 68% of total revenue, with a year-on-year revenue growth of 9% in Q3 2024 [27][28]. - The company has improved its return on assets (ROA) and return on equity (ROE) to 6.5% and 10.8% respectively, marking the highest levels since 2018 [41]. 3. Retail Business - The retail segment is poised for recovery, supported by favorable national policies and increasing consumer spending, with the market for sports apparel expected to grow significantly [46][49]. - The company is actively diversifying its brand offerings, including partnerships with emerging brands, which is expected to enhance its market position [50]. - Inventory management has shown improvement, with a decrease in absolute inventory levels post-pandemic, indicating effective control measures [60]. 4. Financial Forecast and Valuation - The company is projected to achieve revenues of 8.83 billion, and 450 million, 556 million [66]. - The report employs a segmented valuation approach, with a weighted average price-to-earnings (P/E) ratio of 16.8x for comparable companies, while the company's P/E for 2024 is estimated at 7.6x, indicating significant upside potential [7][66].
裕元集团：制造需求强劲利润回升，零售去库调整静待花开