Affected By Trade Wars And Devaluation Of RMB, The Profit Margin Of Yuyuan In The Middle Period Was At Least 40%.

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Manufacturer Yuyuan interim profit will slump 40-45%.

The second surplus police in three months showed that Taiwanese manufacturing giants were in a difficult position in the background of the warming of Sino US trade war and the failure of Baosheng international privatization of group retail business.

Yuyuan industry said that in the first half of 2017, the Group recorded 17 million non recurring earnings, including 9 million yuan derivative financial instruments fair value change income and 10 million US dollar sale of joint venture earnings. Compared to 1-6 months in 2018, the fair value of derivative financial instruments fluctuated at a loss of 22 million US dollars, mainly due to foreign exchange risk hedging contracts, among which RMB and rupiah were substantially depreciated against the US dollar as the main factor.

Since the beginning of the Sino US trade war in late March, the RMB has depreciated rapidly against the US dollar by 10%, from 6.2 to about 6.8.

Although the depreciation of the renminbi is conducive to exports, it also causes huge loss to the manufacturing giant such as Yuyuan industry.

Unless regular losses are made, Yuyuan Industrial's mid 2018 financing costs increased by 18 million US dollars over the same period last year. Meanwhile, the manufacturing business fluctuated by 5.5% due to the fluctuation of orders and the adverse effect of adverse product mix, which also had a negative impact on gross margin of manufacturing business.

Superposition of three factors is the reason why Yuyuan Industrial Profit plunge in the interim.

Nike is one of Yuyuan and Baosheng's biggest customers.

The decline in profitability of Yuyuan industry has long been expected. Before the interim results were released in the early part of this month, big banks were singing empty Taiwanese enterprises.

Citigroup Inc., Citigroup has released a report that lowered its profit forecast and target price.

The bank pointed out that Yuyuan group's ODM (Foundry design and manufacturing) income fell 4.9% in April compared with the same period last year, and the utilization rate of the production capacity was worse than expected. Although ODM's income increased by 2.6% in May, overtime pay was strong.

And in June, Vietnamese factory workers went on strike for three days, and the group had to pay extra air freight charges.

Therefore, Yuyuan group's 2018-2020 year EPS forecast is down by 6%-8%, and it is estimated that the gross profit margin will be reduced from 19.7% in 2020 to 19.7% in 2017.

Deutsche Bank AG, Deutsche Bank, said in a recent research report that the slowdown in mainland retail sales in the two quarter may lead to the further sale of sporting goods retailers in the rest of the summer. Therefore, the outlook for sporting goods stocks in the mainland is cautious.

Up to the end of June, Yuyuan Industrial Income totaled 4 billion 769 million 800 thousand US dollars, up 7.2% from 4 billion 448 million 500 thousand US dollars a year ago. The total revenue of retail companies Baosheng international is 11 billion 203 million 100 thousand yuan, up 17.7% from the same period last year, and the growth rate was unchanged from the first quarter.

On Friday, the stock price of Yuyuan industries (Group) Limited (0551.HK) and Baosheng International Holdings (Holdings) Limited (3813.HK) was HK $23.90 and HK $1.54 respectively, so far this year, the price of the two companies has plummeted 32.01% and 21.43% respectively.

On Friday, August 10th, Yuyuan industry will release its full interim results.