Yue Yuen: Severe Tariff Impacts to Risk Dividend

研报英文原文证据摘录

Yue Yuen: Severe Tariff Impacts to Risk Dividend

China (PRC) | Apparel, Footwear &

Textiles EquityMayResearch14, 2026

FIRST VIEWYue Yuen: Severe Tariff Impacts to Risk

Dividend

Conclusion

YY (Yue Yuen) and PS (Pou Sheng, YY's retail operation) hosted 1Q26

earnings call in the morning of May-14 HKT. OEM business is likely facing

greater-than-expected tariff impact with weaker-than-expected 2Q26 sales

guidance and gross margin outlook. On top of growing Capex, we expect

significant risks to YY's dividend outlook. On the other hand, PS continues

to deliver a turnaround. We are reviewing model.

Detail

*OEM: Tariff burden now significantly hurting margins. The key downside surprise from the

1Q26 presentation was the significant impacts from tariff burdening. Chart 1, according to YY,

tariff burdening likely reduced OEM net margin by 1ppt. This explains why 1Q26 OEM EBITDA

declined by 37% YoY despite utilization rate only down 1ppt YoY (to 90% vs. 1Q25's 91%).

As more and more of YY's clients complete the tariff negotiation, we expect tariff impacts to

intensify into the rest of 2026. We estimate the tariff burden to permanently reduce OEM net

margin by 1/5 to 1/3.

*OEM 2Q26 revenue may continue to miss. YY management indicates that 2Q26 OEM

volume may continue to decline YoY (albeit less significant vs. 1Q26's 8.1% YoY decline).

Market consensus is likely anticipating 2Q26 revenue growth YoY (due to FIFA World Cup).

Management indicates the order viability is low at 2-3 months.

*OEM: More severe margin headwinds. Management hopes OEM gross margin to improve

QoQ but depends on order outlook and raw material prices. This is likely weaker than market's

expectations of a sustainable QoQ and YoY improvements. Management admitted that there