Eu Yan Sang’s profit plunged 38% to $2m in Q2

Due to a massive drop in Hong Kong sales.

Traditional Chinese medicine firm Eu Yan Sang reported a disappointing set of results in the second quarter, with its net profit down 38% year-on-year to $2m.

The decline was mainly due to a 20% sales drop in its biggest market, Hong Kong, as a result of the Occupy Central movement and a decline in Chinese tourists.

According to OSK DMG, EYS is also plagued by high operational leverage as the group continues to see higher wages and rental costs.

“We expect Hong Kong sales growth to linger at mid single-digit on the slow recovery of Chinese tourist arrivals. Given the weaker operating environment, EYS may also delay the commencement of its new factory, which was previously stipulated to be ready by early 2017. While we like EYS’ strong brand name in the traditional Chinese medicine space, we think that near-term recovery would be slow, due to the weak discretionary spending environment,” stated OSK DMG.