CITIC Securities Downgrades SE International
Summary
Pu Yin International has downgraded Tehai International to a ‘Hold’ rating because its net profit for Q1 2025 was significantly below expectations. The company increased its investment in employee benefits during Q1 2025, leading to a rise in employee expenses as a percentage of revenue and a decline in core operating margins year-on-year. Despite having potential in overseas expansion, the slow pace of new store openings is expected to continue pressuring profitability in 2025. Based on the current valuation and market sentiment, the target price for HK stocks remains HKD 16.6 and USD 21.3 for US stocks. Jin Wu News
Impact Analysis
- Business Overview Analysis
- Tehai International is a well-known Chinese food brand aiming to enhance customer-centric strategies through reasonable pricing and improved value per portion to increase customer loyalty and engagement Reuters+ 2. Its expansion efforts are focused overseas, with varied customer prices across different regions .
- The company is affected by industry-wide challenges such as weak demand and price wars, impacting same-store sales growth Zhitong.
- Financial Statement Analysis
- In Q1 2025, revenue grew by 5.4% to USD 1.98 billion, but the net profit was USD 11.9 million, translating to an EPS of USD 0.02, which is below expectations Reuters.
- Operating profit margins have decreased from 6.6% to 4.1% compared to the previous year Finet HK.
- The slow growth in average turnover rates and a decline in average customer spending indicate possible operational inefficiencies and competitive market pressures Finet HK.
- The company’s strategic focus on overseas markets shows higher average ticket prices in North America and other regions, which may help offset domestic challenges .
- Valuation Assessment
- Despite the challenges, the company maintains a hold rating with unchanged target prices due to its overseas potential and strategic positioning Jin Wu News.
Overall, Tehai International faces operational and competitive challenges that are impacting its profitability, but its strategic focus on overseas expansion offers potential opportunities. Investors should be cautious about the continued pressure on profit margins and the pace of international growth.
