Da Mo: Downgraded the target price of Gaoxin Retail (6808.HK) to HK$3.90

DaMo issued a report that Gaoxin Retail (6808.HK) recorded a medium-term net profit of 117 million yuan, an 86% year-on-year decline, indicating that the fierce market competition has caused Gaoxin's net profit margin to fall to a historic low of 0.3%, but believes that these challenges will last longer, and it is too early to buy the stock, and it is necessary to wait for at least one of the negative factors to subside.

The report adds that oversupply is the root cause of intensified competition in the mainland retail industry, and because e-commerce platforms have increased investment in grocery online shopping, and the increase in delivery demand under the epidemic has forced catering retailers to carry out online shopping business, so that they have invested their funds in a market share that has not actually grown, and the loss ratio of group buying and warehouse operators can be as high as 40% to 50% and 10% to 20% respectively, it is believed that the income and profitability of Gaoxin Retail will continue to be under pressure. The bank lowered Gaoxin's earnings forecast for fiscal 2022-2024 by 49%/12%/10%, with a corresponding price target of HK$4.7 to HK$3.9, with a rating of "in sync with the broader market".

This article originated from Grand Gateway