Sports Shoes Foundry Giant Yuyuan Group'S Three Quarter Shoe Business Resumed Growth

Yu Yuen industry's shoe making business, the global sportswear foundry, resumed growth in the three quarter and improved its profitability, while sports brand retail and agency business continued to grow strongly.

The three quarter,

Management points out that growth is mainly due to increased utilization and depreciation of the renminbi.

UBS AG, UBS, said in a recent research report that this could mean a turning point. Group management also expects that the order shipment of the main customers in the fourth quarter will increase.

The first nine months of the whole shoe business (including sports shoes,

Sandals and soles and accessories) achieved revenues of $3 billion 929 million 900 thousand, down 2.8% from the same period last year, and the output and average selling prices decreased by 0.9% to 236 million 500 thousand and 1.9% respectively to 16.62 US dollars per year compared with the same period last year.

Gross profit margin decreased by 140 basis points to 19.3% over the same period last year, mainly reflecting the adverse fluctuations in customer orders in the first half of the fiscal year and the anti leverage effect caused by unfavorable product mix. Gross profit margin has risen in the three quarter, and Macquarie Group Ltd. Macquarie called it "surprise" in the latest research report.

In the first nine months, Yuyuan group's total revenue totaled US $7 billion 151 million 900 thousand, an increase of 6.5% over the same period last year of US $6 billion 718 million.

Net profit dropped by 48.3% to 204 million 600 thousand US dollars over the same period last year of 395 million 900 thousand US dollars. In addition to the weakness in the manufacturing business in the first half of the fiscal year, the decrease in non recurrent revenue and the rising cost of financing also resulted.

3813.HK, a subsidiary of sports brand retailing and agency business, has contributed more than 1/3% of revenue to Yuyuan group, and sales growth in the three quarter has been further accelerated.

As Nike Inc. (NYSE:NKE) Nike group, Adidas AG (AD.DE)

Group and Puma SE (PUM.DE), Puma and other sports brands China's main retail partners, Baosheng International's three quarter revenue rose 22.4% to 5 billion 434 million 100 thousand yuan, and same store sales increased 8.9%. Macquarie Group Ltd. Macquarie believes that this is driven by discount sales promotion.

Group management revealed that the retail discount increased by 100 basis points during the period. On the other hand, although channel inventory has increased, it is still at a reasonable level.

The total revenue in the first nine months was 16 billion 636 million 100 thousand yuan, an increase of 19.8% yuan over 13 billion 883 million 300 thousand yuan in the same period last year.

Operating profit rose 9.9% to 694 million 300 thousand yuan, and business profit margin dropped 40 basis points to 4.2%.

Net profit increased by 15.5% to 389 million 300 thousand yuan per annualized year.

After the first nine months' earnings report was released on Tuesday, Yuyuan Industrial (Group) Co., Ltd. (0551.HK) fell 0.2% on Wednesday, at HK $22.85, which has fallen 28.5% in 2018.

3813.HK rose by 0.68% to HK $1.49 all day, and has risen 31.9% so far in 2018.

Macquarie based

Management's expectations for the four quarter orders and the commitment to repurchase shares and dividends have raised the target price of Yuyuan group (0551.HK) from HK $23.7 to HK $25 and maintained a "win win" rating.

The bank also raised the profit outlook of Yuyuan group in 2019 by 5%, reflecting the expected growth of OEM business in the second half of next year.

UBS also recommended buying "0551.HK", but thought it necessary to take a prudent look at Baosheng international outlook. Therefore, Yuyuan group's 2018-2020 year profit outlook lowered 14%-30% to reflect deleveraging, and the target price was also reduced from HK $33.4 to HK $30.8.