LH Group Limited (1978) AI Stock Analysis

• Market Cap: HK$264.00M
• Dividend Yield: 24.14%
• Average Volume (3M): 207.00K
• Price to Earnings (P/E): ―
• Beta (1Y): 0.50
• Revenue Growth: -5.71%
• EPS Growth: -144.00%
• Country: HK
• Employees: 952
• Sector: Consumer Cyclical
• Sector Strength: 84
• Industry: Restaurants
• EPS (TTM): >-0.01
• Shares Outstanding: 800,000,000
• 10 Day Avg. Volume: 106,200
• 30 Day Avg. Volume: 207,000
• PEG Ratio: 0.09
• Price to Book (P/B): 1.70
• Price to Sales (P/S): 0.37
• P/FCF Ratio: 7.24
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: N/A
• Price Target Upside: N/A
• Rating Consensus: N/A
• Number of Analyst Covering: 0
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 51 Neutral
• Price Target: HK$0.34 ▼(-6.39% Downside)

The overall stock score is primarily influenced by financial performance challenges, including declining profitability and increased leverage. Technical indicators suggest a bearish trend, and valuation metrics highlight potential sustainability issues with the high dividend yield. Strategic improvements are necessary to enhance stability and growth prospects.

Positive Factors

Diversified service revenue streams

LH Group's fee-for-service model and multiple revenue streams (freight forwarding, warehousing, supply-chain services) provide durable revenue diversification. This reduces reliance on any single customer or segment, supports steady cash inflows, and helps the business better absorb demand swings over the next several months.

Strategic partnerships with carriers and suppliers

Established partnerships expand network capacity and service scope without proportionate capital outlays, improving operational efficiency and customer solutions. Over 2–6 months these relationships support reliability, pricing negotiation power, and the ability to scale logistics services when volumes recover.

Positive free cash flow maintained

Despite weaker operating cash flow trends, maintaining positive free cash flow provides an important buffer for operations, working capital and selective reinvestment. This cash generation capacity preserves short-term solvency and offers flexibility to address liabilities or fund efficiency initiatives.

Negative Factors

Revenue decline

A ~5.7% revenue decline signals weakening top-line momentum, reducing operating leverage and making margin recovery harder. If revenue contraction persists, it will pressure scale-dependent cost absorption, limit cash generation, and constrain the company's ability to invest in service enhancements over the medium term.

Profitability deterioration

Moving to a negative net margin and falling gross margins indicate structural profitability issues: pricing pressure, higher costs or mix shifts. Persistent losses erode equity, limit reinvestment and raise the risk of covenant pressure, making sustainable margin restoration a medium-term priority.

Increased leverage and weaker balance sheet

Rising debt-to-equity and shrinking equity reduce financial flexibility and raise interest and refinancing risk. Higher leverage limits the company's ability to navigate revenue or cash flow setbacks, increases vulnerability to rate moves, and constrains capital allocation over the next several quarters.

LH Group Limited Business Overview & Revenue Model

Company Description

LH Group Limited, together with its subsidiaries, operates as a full service multi-brand restaurant company in Hong Kong. Its restaurants specialize in Asian cuisines, including Japanese, Korean, Cantonese, and Shanghainese cuisines. As of December 31, 2021, the company operated one Cantonese restaurant under the Pot Master self-owned brand name; and 44 Asian restaurants under the Mou Mou Club, Peace Cuisine, and Wing Wah Allday self-owned brands, as well as Gyu-Kaku, Gyu-Kaku Jinan-Bou, On-Yasai, and Yoogane franchised brands. The company also sells food ingredients to related parties, and external third parties and other businesses; and provides plant-based burger steaks, Omnipork, and Impossible foods in dim sum, dishes, and hot pot dishes. In addition, it engages in the property holding activities; provision of management services; and provision of procurement and logistics services, as well as trades in ingredients. LH Group Limited was incorporated in 2017 and is based in Kowloon Bay, Hong Kong. LH Group Limited is a subsidiary of LHG Holdings Limited.

How the Company Makes Money

LH Group Limited generates revenue through multiple streams, including service fees for logistics and transportation services, warehousing fees, and charges for supply chain management solutions. The company typically operates on a fee-for-service model, where clients pay for specific logistics services rendered. Key revenue streams include freight forwarding, where the company earns commissions on transporting goods, and warehousing services that charge clients based on space and duration of storage. Moreover, LH Group Limited benefits from strategic partnerships with carriers and suppliers, which enhance its service offerings and operational efficiency, contributing to its overall profitability.

LH Group Limited Financial Statement Overview

Summary

The company faces challenges in revenue growth and profitability, with increased leverage and declining cash flow performance. Despite maintaining positive free cash flow, overall financial health is under pressure due to reduced margins and increased liabilities.

Income Statement

The company has experienced fluctuating revenue trends with a recent decline from 2023 to 2024. Gross profit margins have decreased, and the net profit margin turned negative in 2024, indicating profitability challenges. EBIT and EBITDA margins also show volatility, reflecting operational inefficiencies.

Balance Sheet

The debt-to-equity ratio increased, suggesting higher leverage and potential risk. Return on equity has been inconsistent, and the equity ratio has decreased, indicating reduced financial stability. The balance sheet reflects increased liabilities and decreased equity, which could impact long-term financial health.

Cash Flow

Operating cash flow has decreased significantly, impacting cash flow stability. Free cash flow has also declined, although the company maintains a positive free cash flow to net income ratio. The cash flow situation suggests potential liquidity concerns if trends continue.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	1.08B	1.06B	1.28B	1.06B	997.92M	802.85M
Gross Profit	356.54M	331.74M	505.16M	293.92M	391.29M	336.92M
EBITDA	66.60M	43.31M	269.26M	239.49M	237.86M	271.77M
Net Income	-6.16M	-32.06M	88.06M	77.70M	90.08M	140.33M
Balance Sheet
Total Assets	684.20M	786.01M	759.65M	846.59M	783.86M	747.50M
Cash, Cash Equivalents and Short-Term Investments	100.26M	144.81M	252.72M	341.91M	325.36M	338.77M
Total Debt	277.20M	324.48M	255.18M	223.66M	179.29M	189.15M
Total Liabilities	451.94M	553.14M	462.24M	437.09M	403.66M	332.90M
Stockholders Equity	232.23M	232.87M	297.41M	409.50M	380.20M	414.60M
Cash Flow
Free Cash Flow	18.50M	54.68M	231.97M	170.47M	208.94M	159.73M
Operating Cash Flow	61.66M	120.56M	252.02M	207.44M	251.71M	178.09M
Investing Cash Flow	13.19M	43.01M	29.03M	-96.51M	34.20M	-42.83M
Financing Cash Flow	-67.92M	-166.41M	-329.85M	-156.41M	-223.12M	-86.88M

LH Group Limited Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 0.36
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For HK:1978, the sentiment is Negative. The current price of 0.36 is above the 20-day moving average (MA) of 0.35, equal to the 50-day MA of 0.36, and below the 200-day MA of 0.37, indicating a bearish trend. The MACD of >-0.01 indicates Positive momentum. The RSI at 32.67 is Neutral, neither overbought nor oversold. The STOCH value of 11.11 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for HK:1978.

LH Group Limited Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
8371	72 Outperform	HK$750.36M	7.27	37.48%	7.73%	15.24%	16.25%
Sector *	61 Neutral	$18.38B	12.79	-2.54%	3.03%	1.52%	-15.83%
1978	51 Neutral	HK$264.00M	-42.86	-2.62%	24.14%	-5.71%	-144.00%
0573	51 Neutral	HK$294.16M	-3.35	-8.43%	17.91%	-16.50%	-311.44%
1314	50 Neutral	HK$224.71M	20.12	2.28%	21.88%	1.02%	-71.48%
0126	45 Neutral	HK$201.13M	-3.32	-1.85%	―	-6.71%	74.72%
1443	42 Neutral	HK$67.60M	-1.12	-48.91%	4.48%	-13.13%	-873.33%