UBS: Raises target price for XIAOCAIYUAN (00999) to HKD 8.2, maintaining a "Neutral" rating.

UBS released a research report stating that it maintains a "Neutral" rating for XIAOCAIYUAN (00999) and has raised the target price by 13.9% from HKD 7.2 to HKD 8.2. UBS lowered its earnings per share forecast for the company for 2026 by 4%, mainly considering that the profit margin in the first half of the year was lower than expected and store expansions were delayed; however, these were alleviated by a recovery in same-store sales growth (SSSG). In the first half of the year, XIAOCAIYUAN's revenue increased by 7% year-on-year to RMB 2.9 billion, and the decline in same-store sales on a quarter-on-quarter basis has narrowed, primarily due to the recovery in dine-in customer traffic. Net profit decreased by 24% year-on-year to RMB 290 million, which was 3% lower than UBS's forecast, due to higher-than-expected labor costs, although this was partially offset by a lower-than-expected tax rate. In the first half of 2026, the company added 17 new XIAOCAIYUAN stores, bringing the total number of stores to 824. The goal of reaching 1,000 stores by the end of 2026 has been postponed until next year, reflecting the company's increased focus on the economic efficiency of new store operations and return thresholds. In the first half of 2026, takeaway revenue accounted for 33% of total revenue (down from 39% in the first half of 2025). Management indicated that it will maintain the takeaway revenue ratio between 33% and 35% in the future. Management maintains its guidance for full-year revenue growth in 2026 to be low single digits year-on-year and a net profit margin of 10% to 12% (2025: 13.4%). The bank expects revenue growth to be close to the upper limit of the guidance, while the net profit margin may approach the lower limit of the guidance.