XIAOCAIYUAN (00999) continued its upward momentum with another nearly 6% gain. As of press time, the stock was up 4.03% to HK$11.36, with turnover reaching HK$50.44 million.

On the news front, XIAOCAIYUAN released its interim results showing revenue of RMB 2.714 billion, representing a 6.5% year-over-year increase. Profit attributable to equity shareholders reached RMB 382 million, up 35.7% compared to the same period last year.

UBS noted that net profit margin expanded by 3 percentage points year-over-year, driven by gross margin improvement of 2.7 percentage points and labor cost reduction of 4 percentage points, which was partially offset by increased advertising and promotional expenses, higher tax rates, and reduced interest income. The company declared an interim dividend of RMB 21.19 cents, representing a payout ratio of 65%.

The bank stated that XIAOCAIYUAN's management emphasized focus on product value and restaurant profitability, targeting a dividend payout ratio of 50% to 60%. Same-store sales declined 7.2% in the first half, but have turned positive since May. Store expansion was slow during the period, with a net addition of only 5 outlets to reach 672 stores. However, management maintains its targets of 800 stores by the end of 2025 and 1,000 stores by the end of 2026, noting that store opening pace has accelerated since July.

Based on the strong first-half results and effective cost control measures, UBS raised its earnings per share forecasts for 2025-2027 by 9% to 13%, and slightly increased its target price from HK$13 to HK$14, maintaining a "Buy" rating.