Credit Suisse: Downgrade Maxim's Caterers (00341) target price to HK$5.15, expects local fast food industry to require time for transformation.

Credit Suisse released a research report, stating that it has lowered its net profit forecast for Fairwood Holdings Limited (00341) for the fiscal years 2026 to 2028 by 52%, 51%, and 44%, respectively. This is based on a forecasted decrease in sales of 3%, 4%, and 5%, as the improvement in profit margin was below expectations. The target price has been reduced by 24% to 5.15 Hong Kong dollars (same below), and the "hold" rating has been maintained, as the company's transformation of its Hong Kong fast food chain business will take time and has limited upside potential. Fairwood announced its financial results for the first half of the fiscal year ending September 2026 at the end of November last year, which fell below the expectations of the bank and management. During the period, net profit decreased by 68% year-on-year to 47 million Hong Kong dollars, while sales decreased by 5% to 4 billion Hong Kong dollars. Adjusted EBITDA also fell by 29% (excluding fair value losses on investment properties and impairments). The weak performance was mainly attributed to the impact of market competition and a decrease in consumer traffic due to the influx of northern visitors and outbound tourism on the company's Hong Kong fast food chain business. The company declared an interim dividend of 0.1 Hong Kong dollars per share, with a payout ratio of 122%, based on its good cash position. The bank believes that this move reflects management's confidence in improving operational performance for the second half of the fiscal year ending March 2026 and beyond.