In "Major Banks," China International Capital Corporation (CICC) lowered the target price for XIAOCAIYUAN to 10 yuan and adjusted the earnings forecast for this year and next year down by 24% to 27%

CICC's research report pointed out that XIAOCAIYUAN (00999.HK) announced its annual performance for 2025: revenue increased by 2.6% year-on-year to RMB 5.345 billion; adjusted net profit increased by 22% year-on-year to RMB 715 million. The performance basically met expectations.

CICC expects that XIAOCAIYUAN's future gross margin may decline due to price reductions. By business segment, dine-in/takeout revenue grew by 2.2% and 3% year-on-year, respectively, with the takeout revenue proportion increasing to 39%. The company stated that it will strategically adjust its takeout business in the future, guiding that the takeout revenue proportion may decline to a healthier level (with takeout not exceeding 30% during peak store hours) by 2026. CICC is optimistic about the company's long-term initiatives to optimize its business model through consumer discounts and balancing takeout and dine-in operations, achieving sustainable and steady development.

Considering the pressure on profitability from price reductions, CICC has lowered its adjusted net profit forecasts for XIAOCAIYUAN for the next two years by 27% and 24%, respectively, to RMB 584 million and RMB 715 million. It maintains an "outperform industry" rating, and taking into account the adjustments to profit forecasts and optimism about the company's business model, it has lowered the target price by 14% to HKD 10, corresponding to 18 times and 14 times adjusted price-to-earnings ratios for the next two years, with an upside potential of 29%