Magellan: Upgrade SUNART RETAIL (06808) rating to "buy" with a target price raised to 1.83 Hong Kong dollars.

Macquarie released a research report stating that the net profit for the 2025 fiscal year of SUNART RETAIL (06808) is forecasted to be 478 million RMB, compared to the previous expectation of a loss of 77 million RMB. The bank has also raised the group's target price by 22%, from 1.5 HKD to 1.83 HKD, and upgraded the rating from "neutral" to "buy". The report mentioned that the company's same-store sales turned positive during the period from April to August. Due to the stable growth of same-store sales and the management's goal of cost control, the bank predicts that the group will turn losses into profits in the first half of 2025, reaching 199 million RMB, compared to a loss of 359 million RMB in the same period in 2024. SUNART RETAIL's management believes that there is still enough space in the next three years to reduce the ratio of headquarters staff expenses to revenue from 2.3% to 1%. Additionally, the bank believes that a vacancy rate of 4% should help maintain annual rental income of 3 billion RMB.