Key Takeaways:
Macquarie slashed its target price for Sunart Retail (06808.HK) by 24% to HKD1.30, citing the sustained drag from its offline business on revenue and sales growth.
"Offline retail remains the main drag on SUNART RETAIL's same-store sales growth (SSSG) and revenue," the Macquarie report said. The bank believes the company lacks strong growth drivers, with any earnings recovery dependent on cost savings.
The downgrade was triggered by weak financial results for the second half of fiscal year 2026, which ended in March. Sunart recorded a net loss of RMB196 million, while total revenue fell 10.6% year-over-year. Implied same-store sales dropped 10.3% during the period, reflecting lower customer traffic and average spending. Macquarie slashed its earnings per share forecasts for fiscal years 2027 and 2028 by 87% and 45%, respectively.
Despite the sharp cuts, Macquarie maintained its Neutral rating on the stock, pointing to an attractive 12% dividend yield. The bank forecasts a low-single-digit revenue decline in fiscal 2027 as the company targets a breakeven performance. While online operations remain resilient through partnerships with Meituan and Ele.me, the outlook for the core business remains uncertain.
The severe forecast reduction highlights the deep challenges facing Sunart's traditional hypermarkets. Investors will be watching for evidence that cost-saving initiatives can stabilize earnings when the company reports its next full-year results.
This article is for informational purposes only and does not constitute investment advice.
