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9 Jul, 2025 (Wednesday)

            
XIAOCAIYUAN(999)
Analysis:
Xiaocaiyuan (999) is a well-known Chinese mass-market casual dining chain, dedicated to providing home-style dishes and attentive service at affordable prices, positioning itself as the “family kitchen” for Chinese consumers. The group emphasizes on-site cooking, distinguishing itself from pre-made dishes, and regularly updates its menu with new items and seasonal specialties. According to Frost & Sullivan, the mass-market casual Chinese dining segment, a subsector of the Chinese dining market, features an average check size below RMB100. As of December 5, 2024, Xiaocaiyuan operates 663 directly managed stores across 146 cities or counties in 14 provinces in China, primarily in East China. In terms of 2023 store revenue, Xiaocaiyuan ranks first among all brands in China`s mass-market casual Chinese dining market with an average check size between RMB50 and RMB100, capturing a 0.2% market share. By revenue, the mass-market casual Chinese dining segment with an average check size of RMB50-100 reached RMB2,252.9 billion in 2023, accounting for approximately 55.2% of the overall Chinese dining market.Over the past few years, the group has achieved rapid growth and maintained above-industry profitability. Despite COVID-19 impacts, its revenue grew from RMB2.645 billion in 2021 to RMB3.213 billion in 2022, and further to RMB4.549 billion in 2023, with a year-on-year growth rate of 41.6%. The group operates a delivery business through major third-party online platforms in China, with delivery revenue from Xiaocaiyuan stores reaching RMB409 million, RMB1.027 billion, and RMB1.486 billion in 2021, 2022, and 2023, respectively. Same-store sales increased by 1.2% from 2021 to 2022 and surged by 20.8% from 2022 to 2023. Store-level operating profit margins were 15.9%, 14.2%, and 19.7% in 2021, 2022, and 2023, respectively. Despite COVID-19 challenges, net profit grew from RMB227 million in 2021 to RMB237 million in 2022, and jumped 124% to RMB532 million in 2023, with net profit margins of 8.6%, 7.4%, and 11.7% for the respective years.As urban residents` per capita disposable income growth slows, consumers` demand for “delicious yet affordable” dining options is expected to drive the mass-market casual Chinese dining market from RMB3,618.7 billion in 2023 to RMB5,587.1 billion by 2028, with a compound annual growth rate of 9.1%, indicating significant growth potential.(I do not hold the aforementioned stock.)
Strategy:
Buy-in Price: $10.00, Target Price: $11.00-12.00, Cut Loss Price: $9.40


YOURAN DAIRY(9858)
Analysis:
The Company is a leading upstream raw milk supplier in China, with main businesses including feed production and dairy cow breeding. Yili is the largest shareholder and customer of the company, accounting for approximately 70% of the Company`s sales. However, in 2020 and 2021, they respectively acquired the ranches of Sequoia and Fonterra China to expand their ranch scale. In the past three years, Chinese dairy products have been in a downward cycle. However, the Company, with its outstanding market management capabilities and the strength of its major shareholders, has risen its market share against the trend in industry consolidation, and is expected to benefit from the bottoming out and recovery of the Chinese dairy industry in the future.
Strategy:
Buy-in Price: $2.57, Target Price: $3.03, Cut Loss Price: $2.34



Xinquan(603179.CH)

Company Profile

Xinquan Co., Ltd., founded in 2001, offers a full range of interior and exterior trim assembly products for both commercial vehicles and passenger vehicles. With industry-leading process competence, cost control capability and technical strength, the Company is capable of simultaneous development with OEMs. In 2024, the Company reported revenue of RMB13,264 million (RMB, the same below), up 25.5% yoy; and net profit attributable to the parent company of RMB977 million, up 21.2% yoy. In Q1 2025, the Company reported total revenue of RMB3.52 billion, up 15.5% yoy; and net profit attributable to the parent company of RMB210 million, up 4.4% yoy.

Investment Summary

Stable growth in results
In 2024, the Company reported revenue of RMB13,264 million, up 25.5% yoy, mainly driven by the ramp-up from key downstream customers. Net profit attributable to the parent company was RMB977 million, up 21.24% yoy. Sales to the top five customers amounted to RMB9,889 million, up 38.16% yoy. In Q1 2025, the Company recorded revenue of RMB3,519 million, up 15.5% yoy. Among key downstream customers, the global production volumes of Chery, Geely, Li Auto and Tesla in Q1 2025 increased by 17%, 48%, and 16%, and decreased by 13% yoy, respectively. Net profit attributable to the parent company was RMB213 million, up 4.4% yoy. The gross margin was 19.5%, up 2.0 ppts yoy, showing stable performance, while the net profit margin fluctuated in the short term mainly due to: 1) Overseas business being in the capacity ramp-up phase, resulting in a mismatch between personnel expenses and per capita output; 2) An increase in employee welfare expenses during the period.

Continuous expansion of product portfolio and enhancement of per-vehicle value
While focusing on interior and exterior trim products such as automotive instrument panel assemblies and bumper assemblies, the Company is actively developing its automotive seat business, continuously enriching and expanding its product portfolio to meet existing customers’ demand for integrated interior and exterior system solutions. In 2024, the interior business achieved steady growth, with revenue from instrument panel assemblies, door panel assemblies, and interior accessories reaching RMB8,348 million, RMB2,167 million, and RMB416 million, up 19.6%, 23.9%, and 12.4% yoy, respectively. The exterior business saw rapid volume growth, with bumper assemblies and exterior accessories generating revenue of RMB474 million and RMB229 million, up 415.0% and 29.0% yoy, respectively. The Company is currently accelerating capacity deployment for its seat business, with planned seat back panel capacities of 400 thousand sets in Mexico and 500 thousand sets in Slovakia. Additionally, the Company recently acquired a 70% equity interest in Anhui Ruiqi to accelerate seat business expansion with Chery Automobile. The new business is expected to further enhance the per-vehicle value contribution and lay a solid foundation for the Company’s long-term development.

Accelerated globalization with strong contribution from the North American market
The Company has invested in and established production bases in Malaysia, Mexico, and Slovakia, and set up subsidiaries in the United States and Germany to cultivate the Southeast Asian, North American, and European markets, thereby promoting global expansion. In 2024, the overseas markets made rapid progress, with revenue in Southeast Asia, North America, and Europe all achieving high yoy growth. Among them, the North American market was the standout performer, with revenue reaching RMB700 million, up 89.14% yoy, and a gross margin of 26.37%, up 2.1 ppts yoy. This was mainly driven by the Company’s channel expansion and acquisition of new customers in North America, including a significant increase in orders from internationally renowned electric vehicle brands. Looking ahead to 2025, the production base in Slovakia is expected to commence operations, which will further expand the Company’s channels and customer base in the European market.

Investment Thesis

Xinquan is a promising domestic automotive interior and exterior decoration enterprise. With the continuous expansion of the clients base and production capacity, it is expected to maintain sustained growth. We are optimistic about the long-term development of the Company and expect EPS to be 2.72/3.20/4.20 yuan respectively for 2025/2026/2027, a yoy increase of 35.5%/18.0%/31.0%. We offer a target price of 54.37 yuan, respectively 20/17/12.9 P/E for 2025/2026/2027, and an "Buy" rating. (Closing price as at 7 July)

Risk Factors

1) Progress of new production line is below expectations
2) Electric vehicle sales fall short of expectations
3) Macroeconomic downturn affects product demand
4) Sharply rising raw material prices or sharply falling product prices

Financial Data

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Recommendation on 9-7-2025
RecommendationBUY (Upgrade)
Price on Recommendation Date$ 45.270
Suggested purchase priceN/A
Target Price$ 54.370
Writer Info
ZhangJing
(Research Analyst)
Tel: 86 21 51699400-103
Email:
zhangjing@phillip.com.cn

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