Yuyuan Group: Net Profit Fell Nearly 21% In The First Quarter, And The Stock Price Fell 13% Over A Single Day.

On the evening of May 14th, 00551.HK announced its financial results for the first quarter of 2019.

The announcement shows that the company's operating income during the reporting period was 2 billion 479 million US dollars, an increase of 8.4% over the same period last year, and the profit attributable to the company's owners was 75 million 494 thousand US dollars, down 20.9% compared with the same period last year.

The notice also showed that the non recurrent profits recorded by Yuyuan group during the reporting period totaled $6 million 200 thousand, including the yield of $5 million 900 thousand due to changes in the fair value of financial assets at fair value.

Excluding all non recurring items, the owners of Yuyuan group should account for a recurrent profit of $69 million 200 thousand, a decrease of 23.7% compared to the same period in 2018.

Affected by the news, Yuyuan group fell sharply today. At the close, its share price fell 13.6%, closing at HK $21.6, trading HK $146 million a day, and the latest total market value was HK $34 billion 920 million.

According to the data collected by GE Long Hui, Yuyuan group is a Hong Kong stock listed company holding Taiwanese capital and is the world's largest manufacturer of sports shoes and casual shoes.

It is worth mentioning that Yuyuan group has a subsidiary company 03813.HK in the Hong Kong stock market, and Yu Yuan has a shareholding ratio of 62.41%.

The subsidiary is mainly engaged in sports clothing and footwear distribution and retail, sales of sports brands have Nike, ADI, Puma and so on.

The ultimate holding company of these two companies is listed in Baocheng industry (9904.TW) in Taiwan. Baocheng holds 49.99% of Yuyuan group.

At present, Yuyuan group's global footwear brand customers include Nike, Adidas, Reebok, NewBalance, Asics, Timberland, Rockport and so on.

Yuyuan group holds four exclusive international franchises in China, including Converse, Asics, Coleman and HushPuppies.

In view of the quarterly report, Yuyuan group's sports shoes products achieved a business income of 1 billion 17 million US dollars during the reporting period, accounting for 41% of total business revenue, and sales income of footwear, clothing and rental products reached 976 million US dollars, accounting for 39.4% of total revenue. The sales income of casual shoes / outdoor shoes reached 230 million dollars, accounting for 9.3% of total operating revenue, and the rest of the products accounted for less than 5% of total revenue.

Regarding the reasons for the sharp decline in profit attributable to the owners of the company in the first quarter, Yuyuan group said in its announcement that it was mainly due to the rising cost of financing during the reporting period and the decrease in the performance of joint ventures and joint ventures.

Specifically, the financing cost of Yuyuan group during the reporting period was $24 million 526 thousand, compared with $16 million 346 thousand in the same period in 2018, while the Yuyuan Group recorded a total profit of $4 million 710 thousand in the reporting period and $15 million 300 thousand in the same period last year.

In fact, the decline in Yuyuan group's performance has not happened recently. The company has been criticized by the market for a long time.

If Yuyuan group released its 2018 annual report in April 25th, the company's annual revenue in the reporting period reached $9 billion 695 million, up 6.29% compared to the same period last year, and the profit attributable to shareholders fell 40.85% to 307 million US dollars over the same period.

In addition, by sorting out the quarterly financial data of Yuyuan group, we can see that since 2017, the net profit of the company has slowed down year by year, and net profit growth has slowed down since the fourth quarter of 2017.

In order to reverse the situation of "increasing profits without increasing profits", Yuyuan group announced in May 7th that the company's indirect wholly owned subsidiary Grand Wealth GroupLimited acted as a seller to sell the issued share capital of the subsidiary Texas Clothing HoldingCorp (hereinafter referred to as "TCHC"), and the combined price was composed of the purchase price and the royalty amount of the performance, of which the purchase price was $230 million.

After completion, TCHC group will no longer be Affiliated Companies of Yuyuan group, while TCHC group's financial performance will no longer be incorporated into the group's financial statements.

It is reported that TCHC group mainly engaged in clothing design, import and sale in the United States. In the 2018 and 2017 years, its net profit after tax was $17 million 80 thousand and $15 million respectively.

In fact, before the conclusion of the merger agreement, Yuyuan group holds 99.99% of the issued share capital of the TCHC group, while TCHC has already redeemed some of the issued shares of TCHC to a minority shareholder.

Before the merger comes into effect, TCHC will attempt to redeem a share held by the remaining minority shareholders.

If TCHC fails to redeem the shares, TCHC may reverse share splitting in accordance with Delaware law, and the shares owned by minority shareholders will be written off in exchange for the fair value of the remaining shares.

Therefore, it is expected that Yuyuan group will hold all the issued share capital of TCHC on completion date.

Yuyuan group said that the company can cash in its investment in TCHC, and the sale is part of the company's continued focus on core business development.

According to TCHC group's estimated financial information on completion date, Yuyuan Group expects that the proceeds from the sale of the paction will be approximately $3 million.

However, Yuyuan group has made some changes in its core business and has made some changes. However, it has not been able to hydrolyze near thirsty.

Citigroup said it maintained the "sell" rating of Yuyuan group, with a target price of HK $20.

Lyon issued a research report that the profit forecast of Yuyuan group decreased by 16%, 18% and 19% respectively from 2019 to 2021, and the investment rating was reduced from "buying" to "selling". The target price was reduced from HK $30.8 to HK $21.7.