TC

20/08/2019 14:56

{I-bank focus}Morgan downgrades Xiabuxiabu (00520) to HK$9

[ET Net News Agency, 20 August 2019] Morgan Stanley lowered its target price for
Xiabuxiabu Catering Management China (00520) to HK$9 from HK$12 and downgraded its rating
to "underweight" from "equal-weight" on structural SSSG slowdown and margin pressure.
The research house said Xiabuxiabu now participates in the casual dining category, where
competition is increasing and which has a current ASP of Rmb50+, versus the QSR
(quick-service restaurant) category, where it previously participated in and which has a
current ASP of Rmb30-40.
Morgan said a higher ASP from mix upgrades and fewer promotions has come at the cost of
slower traffic during the brand upgrade this year. Meanwhile, it noted cannibalization due
to the fast pace of store openings.
Morgan likes Xiabuxiabu management's focus on branding investment, but it thinks it will
take time to bear fruit. Morgan lowered its earnings estimates for 2019-21 by 23-30% to
factor in our lower SSSG forecasts and OPM estimates. (KL)

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