XNG’s SSS growth slowed from 5.2% in 1Q15 to -0.2% in 3Q15 as XNG isstill optimizing its menu to attract traffic flow. Although per capita spending isstill expected to decrease by approximately 2% YoY in 4Q15, traffic flowimprovement will completely offset such negative impact. We expect XNG’sSSS in 4Q15 to resume positive growth.
SSS growth in 2015 is much weaker than the management’s expectation andslowing economic growth in China is a concern. Thus, XNG number of newstores opening in 2015 is lower than previous guidance and XNG isexpected to remain relatively prudent in opening new restaurants in2016. Due to weaker SSS expectation and fewer than expected new storesopening, we revise down XNG’s EPS by 80.4%, 53.6% and 52.6%, toRMB0.009, RMB0.035 and RMB0.045 in 2015-2017, respectively.
Despite sharp earnings cut, we expect SSS growth to recover in 2016-2017on continuous traffic flow improvement and lower decline of average percapita spending. In addition, the opening of Disneyland in Shanghai in2016 is expected to help sales growth of restaurants located inShanghai to speed up. Therefore, we reiterate “Buy” but cut TP to HK$0.85on lower earnings, which represents 19.9x 2016 PER and 15.6x 2017 PER.
由于小南国仍然在调整餐单去推高客流量增长,同店销售增速从2015 年第1 季的5.2%下降至2015 年第3 季的-0.2%。虽然2015 年第4 季人均消费仍然同比下跌约2%,客流量增长预期将可以完全抵消该负面因素。因此,我们认为2015 年第4 季小南国同店销售将回复正增长。
Same-store sales in 2015 were worse than management had expected, and China's continued economic slowdown is a concern. As a result, the number of new stores in Xiaonanguo in 2015 is also lower than the previous management guidelines, and we believe that the planning of opening new stores in 2016 will be more cautious. Due to the lower-than-expected same-store sales and the worse-than-expected number of new stores, we reduced the net profit per share for the period 2015-2017 by 80.4%, 53.6% and 52.6% respectively to 0.009 yuan, 0.035 yuan and 0.045 yuan.
Although we have substantially reduced our profit forecast, we still expect same-store sales to return to relatively rapid growth in 2016-2017, mainly due to the continued increase in passenger traffic and a slowdown in the decline in per capita consumption. In addition, Shanghai Walt Disney Company is expected to open in 2016, while sales of different brands of Xiaonanguo restaurants in Shanghai are expected to accelerate. Therefore, we reaffirm Xiaonanguo's "buy" rating, but the target price is adjusted to HK $0.85 as a result of the lower earnings forecast, which is equivalent to 19.9 times 2016 earnings and 15.6 times 2017 earnings.