Shangri-La (0069.HK) warned of a sharp decline in mid-term profits (not including revaluation of invested properties), blaming the decline in hotel operating performance in China and the rise in pre-opening expenses and interest expenses of hotels.

Haitong believes that the Chinese business is Shangri-La's main source of revenue. It contributed 44% and 37% of revenue and profit to the hotel segment last year. Faced with increased supply and increased competition from the mainland industry, its Chinese hotel portfolio will remain under pressure in the short term; it will maintain its holding rating while lowering the target price by 9% to HK$14.2.