Citigroup raises the target price of GREEN TEA GROUP to 13.4 yuan, benefiting from the recovery of the mainland leisure dining industry

Citi published a research report indicating that the operating profit margins of GREEN TEA GROUP (06831.HK) for new and old stores are similar, and the opening of new stores has not dragged down profit margins. It is expected that the rapid expansion of stores will translate into strong profit growth. The management aims to achieve a net profit growth of over 30% and a sales growth of over 20% by 2026, with 30% of new stores to be opened in China.

The bank noted that the management has observed a continuous recovery in China's casual dining industry this year, which is consistent with the observations of the management of China Resources Beer (00291.HK). Citi has a more positive outlook on casual dining operators in China's restaurant industry in 2026 compared to Western fast-food chains.

Citi raised the group's net profit forecasts for this year and next year by 12% and 14%, respectively, to reflect better-than-expected performance in 2025. The bank predicts that the company's sales will grow by 21% year-on-year in 2026, and net profit will grow by 31% year-on-year. Based on a forecasted price-to-earnings ratio of 13 times for 2026, the target price has been raised from HKD 11.1 to HKD 13.4, maintaining a "Buy/High Risk" rating