Xi'an Catering Co., Ltd. operates and manages restaurants and hotels. The company operates a chain of restaurants, hotels, dumpling restaurants, and roast duck restaurants. It is also involved in the property management, skill training, and cultural and entertainment operations, as well as provides catering and food delivery services. Xi'an Catering Co., Ltd. is based in Xi'an, China.

China

Xi'an Catering Co., Ltd.

Consumer Cyclical

The company does not pay dividends at all, or it pays them sporadically. There have only been a few years with dividend payments in the past ten years. 

000721.SZ reported revenue of CNY 645mn in the last 12 months, down 3% from FY24. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 1% from FY24 to CNY -0.22. Market expects EPS to reach CNY 0.03 in FY25.

Over the last six months, the stock performance has varied, with an increase following a drop. The stock's price trend wasn't definitive when matched against its global counterparts from the same sector and industry (as depicted above). Over the past six months the stock has exceeded the performance of this peer group by 2ppts and its growth decelerated by 8ppts in the past month. This is equally valid for peers from the same country and industry. Given the stock's valuation versus its peers, its total price movement is neither favourable nor unfavourable.

The company has reported very poor EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to -10.3% in the last 12 months, a decline from 6.9% in FY23. 

Historically, 000721.SZ has reported very poor net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled -19.8%, down from -14.2% in FY23. 

Xi'an Catering Co., Ltd. reported a return on equity (RoE) of -36.6% in the last 12 months, down from -23.1% in FY23. 

In the last 12 months, the return on capital employed (RoCE) declined to -22.8%, below the peers. 

Another important profitability metric, return on assets (RoA), amounted to -8.8% in the last 12 months, a decrease from -6.9% in FY23. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been -1.7 in the past several years. This ratio implies a fragile shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are close to minimal. In combination with rigorous business standards, shareholder rights are well protected.

000721.SZ has above average trading liquidity. The average private investor can sell his common position in the stock immediately. Liquidity is usually stable and remains extremely favourable on the days with the lowest activity. However, please consider that under highly turbulent market conditions, the trading volume tends to decrease significantly. The stock has a small market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is moderate. We note low margin volatility, among the positive credit factors. Among the negative credit factors, we point to weak positions in its industry, bleak profitability, negligible return on capital, inadequate interest coverage, and an unfavourable capital structure.

In highly turbulent market conditions, 000721.SZ is as volatile as an index. In other words, the stock will move with the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be limited. 

In normal market circumstances, 000721.SZ is highly volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will change somewhat erratically. The stock's losses on its worst days (less than 1-5% of the time) will range from large to substantial. We would also like to highlight the substantial intraday volatility of the instrument. 

Considering past and projected metrics, the stock is distinctly 'expensive' compared to its peers. In particular, the stock is overpriced on P/E, overvalued on P/FC. 

Xi'an Catering Co., Ltd.

CN¥ 9.07

2

Xi'an Catering Co., Ltd.

CN¥ 9.07

2

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

CN¥ 9.07

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