Cautious Buy Rating for Cafe de Coral Holdings Amid Strategic Initiatives and Market Challenges

Analyst Alison Fok from DBS maintained a Buy rating on Cafe de Coral Holdings Ltd. (0341 – Research Report) and keeping the price target at HK$9.90.

Alison Fok’s rating is based on several strategic initiatives and market conditions that Cafe de Coral Holdings Ltd. is navigating. Despite a profit warning indicating a potential decline in net profit by up to 30%, the company is taking steps to enhance its business model and optimize its network portfolio in response to fundamental shifts in consumer behavior. Cafe de Coral is a leading operator in the Chinese fast food sector, with a significant presence in Hong Kong and Mainland China, which positions it well for future growth.
In the face of challenging macroeconomic conditions in Hong Kong, where restaurant receipts have shown modest growth, Cafe de Coral is focusing on promotional campaigns to boost store traffic and expects a growth in sales and segment profit by FY25. The company’s expansion efforts in the Greater Bay Area are expected to support a sales CAGR of 2% from FY24 to FY26. Despite trimming the target price to HKD9.9 due to softer sales expectations, the potential for further market consolidation and positive reception in key areas supports the Buy rating, albeit with caution regarding slower-than-expected sales growth.

Fok covers the Consumer Cyclical sector, focusing on stocks such as Nike, McDonald’s, and ANTA Sports Products. According to TipRanks, Fok has an average return of 6.9% and a 62.71% success rate on recommended stocks.