Man Wah Holdings (1999.HK): 1HFY27 profit alert: Profits miss on cost pressure and impairment losses

Man Wah reported below-expectation 1HFY27 profit alert (ended Sep 30, 2026) on Oct 13; the company expects to record a yoy net profit decline of 70-90% (vs. 31% yoy decline per GSe) for the reporting period. While revenue was largely stable per the alert, management attributed the significant profit decrease to: 1) cost inflation particularly from the petrochemicals price increase post the Middle East conflict, exacerbated by intensified competition, which posed a drag on GPM; and 2) impairment losses on goodwill and other intangible assets related to its previous acquisition in the US due to operating losses from rising raw materials costs and weak market demand. Per the company, it has filed for bankruptcy protection for the acquired subsidiary. Excluding one-off impairment losses, we estimate c.60% yoy net profit decline in 1HFY27. We revise down our FY27E-FY29E EPS by 15-35% to factor in the latest profit alert. Our 12-m target price of HK$3.0 (from HK$3.5) is based on a 9X exit mu