[ET Net News Agency, 4 September 2019] Credit Suisse lowered its target price for
Xiabuxiabu Catering Management (00520) to HK$11 from HK$16.6 and downgraded its rating to
"neutral" from "outperform" considering the near-term margin pressure from rising raw
material and operating cost.
The research house said Xiabuxiabu's 1H topline remains strong with 27.4% growth, driven
by fast store expansion and rising Coucou's contribution, partly offset by a 1.9% SSS
decline. However, the margin was dragged by operating deleverage, as reflected by rising
rental and staff cost ratio. Stripping out the accounting policy change, net earnings were
flattish in 1H.
Credit Suisse is now turning more cautious into the near-term outlook as it views
Xiabuxiabu's margin could be under pressure from (1) accelerating increase in raw meat
cost, (2) rising opex ratio on operating deleverage and fierce competition, and (3)
additional finance cost from accounting policy change during the fast expansion stage.
Credit Suisse cut its 2019-20 earnings forecasts by 30-33% to reflect higher cost and
accounting policy change. (KL)