A Leader in the Hong Kong Fast Food Market, "Accumulate"

股

票

研

究 Company Report: Café de Coral (00341 HK) Barney Wu 吴宇扬 EquityResearch 公司报告：大家乐 (00341 HK) +86 755 2397 6680 [email protected]

8 August 2017

A Leader in the Hong Kong Fast Food Market, "Accumulate"

香港快餐业的领导者，首予“收集”评级

 Café de Coral was founded in 1968 and is the largest catering company Rating: Accumulate 公 listed on the Hong Kong stock market. The Company is principally Initial 司 engaged in operating quick-service restaurant (QSR) and casual restaurant chains and have diversified into institutional catering and food processing 评级：收集 (首次研究)

报 business. Its operations cover 359 operating units in Hong Kong and over 99 outlets in mainland China as at 31 March, 2017. 告 6-18m TP 目标价: HK$26.50  A market leader in the Hong Kong fast-food industry. After almost half a CompanyReport century of development, the Company is firmly established as a market leader in the fast-food industry. During FY2013 to FY2017, the Company's Hong Share price 股价： HK$25.150

Kong QSR & institutional catering business has maintained strong growth with a CAGR of 7.5%, higher than the industry growth rate due to rigid demand from customers and a long lasting reputation in the mass market. Stock performance Café de Coral operates diversified fast casual & casual restaurants, which 股价表现 has maintained a high growth rate, however, performance has been unstable. 25.0 % of return

Overall, the mainland Chinese catering industry recorded strong growth over 20.0 the last five years, but performance of Café de Coral in the market has been 15.0 unsatisfactory.

10.0  Regardless of fluctuations in the global macro economy, we believe that the

证 Company can still maintain its profitability due to its solid customer base and 5.0

券告 stable demand for healthy fast food. The Company is working towards a 0.0 full-service catering group, and we have seen its growth potential in the fast 研报 (5.0)

casual and casual dining market. Moreover, Café de Coral has rewarded

(10.0) 究究 shareholders generously with high payout ratios and will maintain the high Aug-16 Nov-16 Feb-17 May-17 Jul-17 rate. As a result, we initiate with “Accumulate” rating for Café de Coral HSI Café de Coral 报研 and set TP at HK$26.50, which represents 27.9x/ 25.7x/ 24.8x FY2018/

告 FY2019/ FY2020 PER. We suggest that investors accumulate shares 券

during price dips. EquityResearch Report Change in Share Price 1 M 3 M 1 Y 股价变动 1 个月 3 个月 1 年

 证大家乐是香港上市的最大餐饮公司，创建于 1968 年。公司主要从事经营速食餐饮和休闲餐饮连锁，并扩大经营范围至机构餐饮和食品加工业务。截止 2017 年 3 月 31 日，其经营 Abs. % 1.6 (1.8) (2.0) 绝对变动 % 范围包括在香港地区 359 家门店，中国大陆 99 家门店。 Rel. % to HS index

(7.7) (14.4) (25.1)

消  香港快餐行业的领导者。在经过半个世纪的发展之后，公司在快餐行业有着坚固的市场领相对恒指变动 % Avg. share price(HK$) 导地位。因为大家乐客户的需求非常稳定和在大众餐饮市场持久的声誉，2013 财年至 2017 24.9 25.5 26.0 费平均股价（港元）财年公司的香港速食餐饮及机构饮食业务保持着强劲的增长，年复合增长率达，高于 Source: Bloomberg, Guotai Junan International.

Catering 7.5%

–

行行业平均增长率。公司经营着不同种类的快速休闲及休闲餐饮餐厅，保持着高速增长但表现不是很稳定。过去五年中国大陆餐饮行业整体保持高速增长，但大家乐在大陆市场的表业现不是很让人满意。

| Sector  不管宏观经济如何波动，因为其稳固的客户基础和中式健康快餐稳定的需求，我们相信公

餐

司仍然能保持其盈利能力。公司正朝着全面服务的餐饮集团努力而且我们看到了其在快速饮休闲及休闲餐饮市场的潜力。而且，大家乐已经通过高派息率慷慨地回报股东，且将来仍然会维持该比例。因此我们首予公司“收集”评级，目标价为 26.50 港元，相当于 27.9 倍

Consumer 2018 财年市盈率、25.7 倍 2019 财年市盈率及 24.8 倍 2020 财年市盈率。我们建议投资者逢低收集。

Year End Turnover Net Profit EPS EPS PER BPS PBR DPS Yield ROE 年结收入股东净利每股净利每股净利变动市盈率每股净资产市净率每股股息股息率净资产收益率 03/31 (HK$ m) (HK$ m) (HK$) (△%) (x) (HK$) (x) (HK$) (%) (%) FY16A 7,567 518 0.900 (11.8) 27.9 6.063 4.1 1.174 4.7 14.4 FY17A 7,895 504 0.870 (3.3) 28.9 5.971 4.2 0.810 3.2 14.3

HK) HK) FY18F 8,355 555 0.949 9.1 26.5 6.068 4.1 0.810 3.2 15.8

FY19F 8,856 603 1.030 8.5 24.4 6.293 4.0 0.820 3.3 16.6

大 0341 FY20F 9,294 625 1.067 3.7 23.6 6.514 3.9 0.830 3.3 16.7

家 Shares in issue (m) 总股数 (m) 585.3 Major shareholder 大股东 Lo family 43.6% 市值自由流通比率乐 Market cap. (HK$ m) (HK$ m) 14,721.2 Free float (%) (%) 56.4 3 month average vol. 3 个月平均成交股数 (‘000) 523.9 FY18 Net gearing (%) FY18 净负债/股东资金 (%) Net Cash

de Coral deCoral 52 Weeks high/low (HK$) 52 周高/低 28.000 / 24.500 FY18 Est. NAV (HK$) FY18 每股估值（港元） 27.2

é Source: the Company, Guotai Junan International.

Caf See the last page for disclaimer Page 1 of 22 Se Statement Financial Valuation Financial Analysis Business Analysis Industry Analysis Company Analysis e Net profit Gross profit & Operating Revenue Food processing & Distribution business Catering Service of Catering Service of Mainland Catering Business Analysis Hong Kong Catering Business Analysis Management Shareholder Structure Milestone Company Profile th e las t pag

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Company Report Café de Coral 大家乐 (00341 HK) 8 August 2017 Se Source: 2016 2014 2013 2011 2003 2001 2000 1999 1998 1996 1992 1992 1991 1990 1988 1986 1979 1977 1969 1968 Time Table 2014 D semi supplying Guangzhou, in centre processing food central Series. Index Composite Seng & processing business by acquiring food. Italian Catering Pacific Asia 1986, plant processing in a move to lower and costs ensure consistency. restaurant Coral The is price fast the in leader market and Kong Hong Company home tiny, has Company Café Company Milestone Company Profile elta

Noodle e well

th busines processing food and catering institutional into diversified Company s . e de Coral de . region the 1 the Company the

accepted las : Historyof Key Milestones and In In China, mainland t

first

in 1998. in is - is pag grown enterprise into a giant,diversified multi

. principally operatingquick engaged in now CDC TheCompany TheCompany sold TheCompany launched newa TheCompany opened largea TheCompany acquired TheCompany was appointed as one of topthe 200 constituentsof the Hang SengComposite IndexSeries. TheCompany started acquire to TheCompany entered the studentcatering business with the introduction of the TheCompany started another TheCompany acquired TheCompany opened its first restaurant outside Hong Kongin nearbythe of city Shenzhen TheCompany opened its 100th restaurant TheCompany acquired TheCompany entered institutionalthe catering business with the launch of TheCompany deCoral went public. Café TheCompany established its first food processing plant lower to costsand ensure consistency TheCompany started promoting restaurantsits throughTVcommercials. TheCompany openedde Coral its first Café deCoral was established Café by LoTang Key milestones

The Company acquired Company The e local local catering industry Analysis

fo was was ( by local customers. "CDC" or "CDC" r , Guotai Junan International. Junan Guotai , over

firmly established as a market leader in in leader market a as established firmly

opening disclaimer In October 2001, 2001, October In 1992. in Shenzhen in Kong Hong outside restaurant first its opened founded .

I n 1991 n

- outlets in Mainland China Mainland in outlets food sector, servicing some 300,000 customers daily customers 300,000 some servicing sector, food opened its 50th Café deCoral opened restaurant. its 50thCafé purchased

Café

in the Causeway Bay district of Hong Kong in 1969. inKong Hong of Causewaydistrict inBay the "the Company") "the

in October 1968 , t , Manchu Wok

In 2003, CDC acquired CDC 2003, In de Coralde he Company acquired Company he Scanfoods Scanfoods The Oliver’sSuper Sandwiches

propertyonOrion Court, No.23 Mau Tan Street to to do so the Company the

Manchu Wok, Manchu SpaghettiHouse

c restaurantquick c

entral has Café entral

Manchu Wok forHKD54.4 million. ,hama processing and fooddistribution business. . at that time.

CDC is one of Asia’s largest publicly listed restaurant listed publicly largest Asia’s of one is successfully spreadsuccessfully its

f de Coralde by Lo Tang ood f ood

w - started another quick service service p seong

rocessing as restaurantin a Chinese fast food chain in North America North in chain food fast Chinese a rocessing ,populara chain thatserved HK ,

- a Chinesea fast food inchain North America. service chain called the of constituents 200 top the of one as appointed at The -

Oliver’s Super Sandwiches. Super Oliver’s national corporation.After almost half a century of development, （罗腾祥） In 1990,

the restaurant which makes snacks, saladsand selectedhot - seong Spaghetti House Spaghetti

- c March, 2017 March, manufactured food to its restaurants located in in located restaurants its to food manufactured c entrein Guangzhou. fast

entrein Tai Hong Po, Kong.

CausewayBay it - CDC

andLaw HoiLuk food industry. food ( entered the institutional catering 罗腾祥 s restaurants s.

(QSR) and

- w service service restaurant chain called Café SuperSuper Congee Noodle & as . ) and Lo Hoi Luk

Kong, Hong In listed listed , a popular chain that served H served that chain popular a ,

de Coral de

AsiaPacific Catering

with both Chinese and Chinese both with

across Its - （罗开睦） fast casual & casual & casual fast on

style style Italianfood. In 1979, the Company established Company established the 1979,In

Luncheon Star

operations cover cover operations

In 2011, the Company opened a large a opened Company the 2011, In the Hong Kong Stock

all major

n 96 CC anhd no food into launched CDC 1996, In s

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( 罗开睦

Pearl River in 20 in de Coral is the undisputed the is Coral de

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00 with thewith 359 restaurant chains and Super Super Super Congee . w

, transformed from a from transformed

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ong sold it in it sold

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Company Report Café de Coral 大家乐 (00341 HK) 8 August 2017 Se April 1 Officer on 2015 September in Officer Executive Chief Deputy as appointed was He 1998. since Director Executive an been has and 1996 in Group the joined He London. of University the from Physics Medical in Degree Luk, Hoi Lo 1997 to Mar Group in 1982 and has been an executive director since 1990. He was the Tang was Kwong Yue Chan Mr. succeed April 1 On As * Company, Source: the Wikipedia, Figure of virtue by shares these in interested be to deemed was Limited. (Guernsey) Nominees Company, the of Director a being Shing, Tak Lo *Mr Company, Source: the Figure Management Shareholder Structure e (Founderde Coral Café of Mr Lo Hoi Chun is a relative of Mr Lo Tang Lo Mr of relative a is Chun Mr Hoi Lo

at (ChiefExecutive Officer) th InternationalLimited (FounderVitasoy)of pone a Cif xctv Ofcr o repla to Officer Executive Chief as appointed -

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Lo March 2: 1: structure of Shareholder t LoHoi 罗开睦

Kwee pag , Tak (ChiefExecutive Officer) Family Lo of Tree

ch, 2016, Wandels 罗开睦 (Guernsey)Limited 100% e 罗腾祥 Mr Shing BNTB BNTB Nominees - Luk seong

15.26% , fo 2012 2012 and was appointed the Chief Executive Officer on 1 April

罗德承先生 Lo 201 r , Limited

2016 disclaimer Tak Mr. Mr.

Investment Guotai Junan International. Junan Guotai ) of of ) 7 of ) Shing , structure the shareholder of 100% Verdant Success HoldingsLimited 100% Lo Hoi Kwong ( Kwong Hoi Lo .

CDC (Non CDC *

Guotai Junan International. Junan Guotai - Ms Lo 曹宝平女士

executiveDirectors) , holds a Master’s Degree in Medical Physics from the Univer the from Physics Medical in Degree Master’s a holds , 50%

Tso 罗碧灵女士 hls Mse’ Dge i Ceia Egneig rm tnod nvriy H jie the joined He University. Stanford from Engineering Chemical in Degree Master’s a holds , （罗） PoPing

Pik ( 陈裕光 - Ling

seong, Mr Lo Hoi Luk, Mr Lo Hoi Kwong, Mr Lo Tak Lo Mr Kwong, LoMr Hoi Chan Mr Luk, Yue Hoiand Ling, Lo Pik Shing,Peter, Kwong Mr Lo Ms seong,

Ardley (Founderde Coral) Café of Café 6.39% 罗开光 Mr

Limited ) Mr Mr LoHoi as the Chairman of the Compa the of Chairman the as Mr. LoChin Enterprises

罗开光、曹宝平夫妇 100% de Coral Coral de as LoTang 罗腾祥先生 (Chairman) LoHoi Ms 罗进兴罗开光 ) Kwong

Tso retire

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罗开亲、文宝琼夫妇 executiveDirectors 100% （ managing managing director of the Company from Dec Chan 7 陈裕光先生 Ex

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and was appointed as C as appointed was and ） )

and 5.45% hi sity of Surrey of sity m Mr

was elected by the Board to Board the by elected was being Mr 罗开亲先生 LoChun*Hoi Chan Mr. Lo Tak Shing ( Shing Tak Lo Mr. 陈裕光先生

(ExecutiveDirectors) beneficiary of one of BNTB BNTB of one of beneficiary Yue Mr Café 2.91% LoMing 罗名承先生 Kwong

de Coral de and Ms ManBoKing

Shing

hief Executive hief a Doctorate’s a

Ms Lo 文宝琼女士罗碧灵女士

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Company Report Café de Coral 大家乐 (00341 HK) 8 August 2017 Se to The costs. loc in rises moderate and inflation global low given term, near the in contained remain should risks inflation that suggested mostly home from away bought meals rem has 2017. May Inflation reach could 2 employment favorable and arrivals visitor in revival conditions, demand QoQ adjusted seasonally a sentiment, business However, 1Q16. growt economic Prices) (Constant GDP ( the Hong Kong The Industry International. International. Department Statistics and Source: Census Figure International. Department Statistics and Source: Census Figure Hong Kong Catering Business Analysis

low base in 1Q16, 1Q16, in base low 1,000 1,500 2,000 2,500 3,000 100 200 300 400 500 600 700 HKD billion HKD billion e be be between 500

0 0.8% th 0 Macro e Mar-12 1.0% 7.4% 2005 las

ained ained Jun-12 5 3 1.8% t has

in in c : Kong Hong :Kong Hong pag 7.0% 2006 coming

Sep-12 e Since Hong Kong CPI hit a 17 a hit CPI Kong Hong Since 3.1%

’s

conomic Analysis onstant % e Dec-12 3.4%

Hong Kong GDP (Constant Prices) (Constant GDP Kong Hong remained

Hong Kong GDP (Constant Prices) GDP (Constant Kong Hong econom at low level low at 2.0% and 2.4% and 2018 2017 in 6.5% fo 2007 - h in Hong Kong significantly slowed down slowed significantly Kong Hong in h 3% for 2017.

Mar-13 3.1% r due to to due disclaimer

per capita capita per

adjustment U.S. in interest rate Jun-13 3.1% 2.1% 2008

Hong KongHong Sep-13 HongKong p 2.9%

EnvironmentinKong Hong rices) grew y - 2009 Dec-13 2.5% 3.0%

Annual Quarterly

an moderate

has

Mar-14

2.2% oprsn atr he cneuie ures f ai growth. rapid of quarters consecutive three after comparison,

improved global economy, economy, global improved 6.8% 2010 as external price pressure price external as

Jun-14

3.2% rebounded rebounded gr Sep-14 2.6% owing ’s ’s 4.8% 2011 GDP

Dec-14 economic growth has economic growth 2.4% GDP

from HKD2,279from billion in 2013 HKD2,448to billion in 2016 of Hong Kong of Hong Kong, of Hong GDP .

1.7% Hong Kong CPI in in CPI Kong Hong Mar-15 2012 3.1%

& YoY Growth

Jun-15 2016 in HK$333,601 to 2013 in HK$317,512 from 2.3%

grew 4.3% YoY, st the 4.3% grew Hong Kong GDP Growth YoY Kong Hong & YoY Growth 3.1% 2013 nrae faster increase Sep-15 Growth YoY GDP Kong Hong 1.9% strongly. - month high in Aug 2016, the YoY the 2016, Aug in high month Dec-15 1.0% 2.8% 2014 , Guotai Junan Junan Guotai ,

Mar-16 Junan Guotai 1.8% .

2.4% Jun-16 2015 2.0% s

may Sep-16 3.2% Hong Hong Kong recorded mo

2.0% Dec-16 2016 4.3% resum has

Jun

been

add further downwa Mar-17 than 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% - - 0.0% 2.0% 4.0% 6.0% 8.0% 4.0% 2.0%

stayed low stayed 201 due to to due

ption notably rongest growth rate since 2Q11rate since growth rongest the Growth Figure International. Department Statistics and Source: Census Growth Figure Interna Department Statistics and Source: Census 7 100,000 150,000 200,000 250,000 300,000 350,000 100,000 50,000

HKD 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000

recorded HKD

vrl cnue pie index. price consumer overall o a f - tional.

0.3% severe recover visitor arrivals, resilient domestic demand and positive and demand domestic resilient arrivals, visitor 2005 6.9% .

Mar-12 - 6

0.1% 4 In last five years, years, five last In and income conditions, forecast conditions, income and Hn Kong Hong : Jun-12 Kong Hong :

0.9% 2006 6.3% a

Sep-12 Kong Hong GDP (Constant Prices) 2.2% rd pressure on on pressure CPI rd

dest and stable growth from 2013 to 2016

1.9 external environment external ing change in CPI has gradually slowed down slowed gradually has CPI in change Dec-12 3.0% 5.6% 2007

% Mar-13 2.7% since 2

2008 1.5%

Jun-13 Growth YoY capita per GDP Kong Hong Prices) (Constant capita per GDP Kong Hong YoY increase YoY 2.5%

Sep-13 2.3% - 2009 Dec-13 2.7% Quarterly 2.2% Q Annual

Mar-14 16 the prices of prices the , 1.5%

6.0% 2010 md h srnteig f global of strengthening the Amid ih CG o 1. of CAGR a with ,

Jun-14 . 2.6%

with a CA In 1Q17,In Sep-14 , 2011 4.1% 2.0% and further grew by 0.7% in ain 0.7% by grewfurther and . The m

of Hong Kong of Hong Dec-14 Kong, of Hong 1.5% D pr capita per GDP gvrmn spokesman government A down 0.1 ppt from 2.0% in in 2.0% from ppt 0.1 down , D pr capita per GDP

Mar-15 2012 0.6% 2.2% hitting a two a hitting Hong Kong Hong GDP YoY Growth Jun-15 Café 1.5% arket partly 2013 2.7% GR of Hong Kong food and food Kong Hong Sep-15 1.1% ed

Dec-15 Coral de 0.4%

2014 2.0% real GDP growth GDP real , Guotai Junan Junan Guotai ,

expects

Mar-16 Junan Guotai benefit 1.2% 2

.4 Jun-16 7 2015 1.5% 1.7%

%. %. - % and GDP%

year low in in low year

Page Page Sep-16 ( 2.3% 00341 HK 00341

2016 1.4% In ting

Dec-16 YoY & 3.7% YoY &

inflation

Mar-17 5 where 2H15 - 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 0.5%

- - 0.0% 2.0% 4.0% 6.0% 8.0% of of

from 4.0% 2.0% and 22 )

Company Report Café de Coral 大家乐 (00341 HK) 8 August 2017 Se expenditure.17.7% total in for expenditure Stati and gro expenditure consumption of KongHong foodexpenditure growth recor 3Q16. since growth improving consumer confidence, consumption Private retail total sales toKong to Taiwan and Korea China mainland from arrivals power of mainland visitors was damaged. Fu Kong. Hong to traveling toward Kong Hong in residents Mar Since growth, moderate maintained resumedsales 3.0% YoY Mar growth in T

Source: the Company, Guotai Junan International. Company, International. Source: the Junan Guotai Figure International. Department Statistics and Source: Census Figure otal retail sales sales retail otal (1.0) e % HKD billion 10 20 30 40 50 60 0.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 4.0

0 th

14 - e Jan YoY %

las

14 - Mar Mar-12

9 7

stics Department of Hong Kong, household expenditure on food in general was approximately 27.3% of total total of 27.3% approximately was general in food on expenditure household Kong, Hong of Department stics

t May-12 14 - May :Kong Hong : ch,

pag Jul-12 Hong KongHong TotalRetail Sales

14 - Jul Sep-12

n 1Q17 in Hong Kong Composite CPI: Meals Bought away from Home YoY Home from away Bought Meals CPI: Composite Kong Hong YoY Food CPI: Composite Kong Hong YoY CPI: Composite Kong Hong 14 - Sep attitude aversive of because fall to started China mainland from visitors of number the 2015, Nov-12 fo

2016 Jan-13 14 - r Nov

Hong Kong retail Hong total sales: Value

disclaimer Mar-13

in Hong Kong Hong in 15 - Jan May-13

. 15 - Mar Jul-13

rivate consumption growth recorded 3.7% YoY in 1Q17, up 0.1 ppt from 3.6% YoY growth in 4Q16. in growth YoY 3.6% from ppt 0.1 up 1Q17, in YoY 3.7% recorded growth consumption rivate Hong Kong. Kong. Hong Furthermore, meals bought away from home represents 65.0% of food expenditure food of 65.0% represents home from away bought meals Furthermore, . In last five years, Hong Kong food expenditure growth rates rates growth expenditure food Kong Hong years, five last In .

Sep-13

15 -

a been has May CPI YoY Change

maintain maintain Nov-13

15 - Jul

Jan-14

rthermore, as rthermore,

15 - Sep Mar-14

wth rate due to the resilient demand for food and rise and food for demand resilient the to due rate wth May-14 15 - Nov attributable mainly ha

s Jul-14

16 - the Jan mainland visitors and the new policy aimed at limiting the frequency of Shenzhen residents Shenzhen of frequency the limiting at aimed policy new the and visitors mainland

ve Sep-14

improve

16 - Mar Kong of Hong

improved Nov-14 Although total visitor arrivals slightly decline slightly arrivals visitor total Although recover

recovered Jan-15 recovery of

16 -

May Mar-15

16 - Jul ch May-15

the the 16 - Sep Jul-15 ded However, due to the political conflicts between China and South Korea and Taiwan, ment

2017 after 24 months of decline. In Apr

Sep-15

ing

16 -

Nov YoY Growth Nov-15

RMB

, Guotai Junan Junan Guotai ,

due to due 17 - a Jan

, Jan-16

in in 2H1

notable hike 4Q16 within ic Mar since since 17 - Mar Mar-16 the

to recovery to May-16

17 - May been had rate exchange HKD to Jul-16 economy and rising income, private consumption

Sep-16 increased 7 to7 thanks

(25.0%) (20.0%) (15.0%) (10.0%) (5.0%) 10.0% 15.0% 20.0% 0.0% 5.0% Nov-16 3Q16 Jan-17

ch Mar-17 May-17

07 as 2017

n food and in International. Department Statistics and Source: Census Figure Source: the Source: the Mainland Chinafrom YoY Figure

(3.0) (2.0) (1.0) % inbound tourism and resilience and tourism inbound 3.0 3.0 4.0 0.0 0.0 1.0 2.0 (30.0%) (20.0%) (10.0%) visitor arrivals from m from arrivals visitor a 10.0% 20.0% 30.0% 40.0% 0.0% rebound of

Mar-12

oe orss change tourists more 8 14 - Jan 10 May-12 :Kong Hong

Company, International. Junan Guotai

demand Jul-12

14 - a Mar :

Sep-12

Hong Kong Composite CPI: Meals Bought away from Home MoM Home from away Bought Meals CPI: Composite Kong Hong MoM Food CPI: Composite Kong Hong MoM CPI Composite Kong Hong 5.6% YoY and increase,

14 - May and Arrivals Visitor Total Nov-12

Jan-13 14 - Jul the

d Mar-13 Visitor Arrivals from Mainland China Change YoY Change China Mainland from VisitorArrivals YoY Chagne Arrivals TotalVisitor

14 - Sep il

May-13

1.9% YoY in YoY 1.9%

RMB rate. HKDexchange to

Jun a re has 14 - Nov Jul-13

depreciating since 2015, the purchasing the 2015, since depreciating

in food price food in

Sep-13

15 - Jan CPI

e, Nov-13

were

15 - Mar Jan-14 2017 ainland China. ainland

and strong mained Mar-14

MoM ChangeMoM 15 -

May Change May-14

15 - oty ihr than higher mostly Jul Jul-14

, Hong Kong

their destinations destinations their Sep-14

Jun 15 -

Sep

towards

of Hong Kong of Hong Nov-14 s

15 - . According to According . Nov Jan-15 e

Mar-15 slightly slightly tolowered 16 - Jan

2017, we expect Hong Hong expect we 2017, has

May-15 Café

16 -

Mar Jul-15

16 - May Sep-15 local consumption local

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t disposable income Chinese consumers. of huge is China in business catering of potential he total sales in FY2016FY20 salestotal in and 's operating units operating 's % of total sales in FY2016 and FY and FY2016 in sales total of % According to the "To Promote 100 million Non "Tothe million to 100 According Promote

in China is is China in in mainland Chinamainland QSR units.

September 2016, more than 100 million rural residents are a QSR contributed 14.2% and 12.4 and 14.2% contributed QSR a ct ct entrepreneurs and capital to the social more Café de Coral Fast Food Fast deCoral Café Super catering remained and Asia Pacific Catering Asia Pacific Food Fast deCoral Café MainlandChina Centre Processing FoodCentral Hong Kong Star Luncheon intensi sharing. Super

distribution. category Congee & & NoodlesCongee

at around 458 around at equal

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F 20 will enlarge as new urban residents form new new form residents urban new as enlarge will atering including ast casual astcasual The Company's in . As taste and attention of consumers 17. Its core business, QSR business, core Its 17. the the Hong Kong Hong

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- 465. The increase in Hong Kong QSR QSR Kong Hong in increase The 465. industry % to the Company's sales in FY2016 in sales Company's the to % nentoa w international and - urban registered Population Settle Settle Population registered urban ,

, casual dining dining casual contributed

Oliver’s Super Sandwiches Oliver’s Super supported by supported but as a rare form of offline of form rare a as Hong Hong Kong catering busines The Spaghetti HouseThe Spaghetti

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Company Report Café de Coral 大家乐 (00341 HK) 8 August 2017 Se food fast increas restaurants new with steady, FY2017 in 1.0% to FY2016 in 4% from slowed Café QSR Kong Hong its of sales store canteen customers and businesses catering institutional and (QSR) restaurants service 6.7 recorded Company gr strong maintained catering in leader market The 2017 catering institutional of number The hospitals. brands: restaurants As dishes. Chinese popular other and dishes traditional Chinese dishes to Western cuisine at a friendly price and the FY2017 QSR Kong Hong Source: Source: Figure Company, International. Source: the Junan Guotai Figure Catering Service e th 10.1%

. de de Coral fast food e las ing t .

9.4% he Company.he Catering Pacific Asia for ordinary people. In other words, dining in

33 31 Hong Kong QSR business Hong Kong outlets and 4 t

pag 12.4% faster than faster : : Sales 14.2% and 50 and Café e fo a FY2017 FY2016 r 2.0% 2.0%

long long reputationlasting in the mass market disclaimer d

Distribution n i and e Coral Coral e Fast Food Super Super Congee & Noodles & Congee Super Super

s Café more Super & Super Congee more Noodles shops.

% YoY growth in Hong Kong QSR Kong Hong in growth YoY % the reached

74.4% of siuinl catering nstitutional

75.6%

fast Café de Coral fast food fast Coral de

owth momentum with a CAGR of 7.5 of CAGR a with momentum owth and being being -

approximately 4% YoY food industry food of

de de Coral in Hong Kong Luncheon Star Luncheon Café and

includes de eey er ad h nme of number the and year, every added Food Processing & Distribution Processing Food dining casual and casual fast The Catering Institutional & QSR Kong Hong

Mainland China QSR China Mainland

Institutional catering Institutional

de Coral

Café de Coralfood fast de Café

. In the coming months, coming the In . operating units operating at .

. The expansion of the Company in Company the of expansion The . combined During FY2013 to FY2017 to FY2013 During

31 .

Asia Pacific Catering Pacific Asia March

Café restaurants both both

and de coral has become a habit for some

, . addition,In

otiue 7.% n 75.6 and 74.4% contributed

2017, the Company operate Company the 2017, in FY16 restaurants

declined from 83 as 83 from declined

Institutional ca Institutional excluding North North QSR. excluding American of units operating total represent red in The numbers 2: Note Shanghai Note Company, International. Source: the Junan Guotai Figure Source: Source: Figure over the over 100 150 200 250 300 350 400 450 500 in Hong Kong. Institutional catering business includes two two includes business catering Institutional Kong. Hong in 50 0

%, higher than the industry growth rate. In FY In rate. growth industry the than higher %, : Before 2015, Oliver's Super Sandwiches, Mixian Sense, and and Sense, Mixian Sandwiches, Super Oliver's 2015, : Before

and and FY17, but SSSG of and

Google the Company is going to open 12 open to going is Company the 32 34 lat LaoLao were classified in in were classified LaoLao in FY2013

maintained

target 450 301 109 : Units Operating : 40 t Super Super Congee & Noodles & Congee Super Super last five years five last Hong Kong, er serve Super Super Congee &Noodles Super Super , the Company's Hong Kong QSR & Institutional & QSR Kong Hong Company's the ,

search image search tering business. tering ue Spr oge Noodles & Congee Super Super s

institutional s FY2014 at 454

an extensive array of congee and noodle 306 107 41 strong

Mainland China QSR Mainland China Dining Casual & Casual Fast Hong Kong Catering Institutional and QSR Hong Kong the 31 March 31 . Café

was solid was d Hong Kong QSR market market QSR Kong Hong sls to sales %

over 166 over

the the growth

de Coral fast food of Super Super Super Congee & Noodles clients such clients The p The FY2015 Hong Kong QSR sector.QSR Kong Hong 461 273 126 , Café 62

2016 Hong Kong

due to rigid demand from demand rigid to due in recent years. SSSG of of SSSG years. recent in erformance of core quick core of erformance

Café de Coral fast food fast Coral de Café Coralde , Café

CDC to 79 to

FY2016 more

as universities and universities as

465 282 114 . The. 69 de Coral de

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has become has become Café Café

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de Coral Coral de has been has

2017 the 2017 FY2017 de 458 295 64 99 March 13

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a ,

Company Report Café de Coral 大家乐 (00341 HK) 8 August 2017 Se FY2017 and restaurants. specialize and cuisine Series 360 specially designed POP UP Pizza Sandwiches segmen operation Diversified Source: Source: Figure Source: Figure International. Guotai Junan Department Statistics and Source: Census Catering inInstitutional Hong Kong Figure 120 150 180 e 30 60 90 th 0 e las the the Company the t 151 s 38 37 35 FY2013 t 64 about operates Company the , pag Company. 28 : : which provides wide a variety of coffee, drinks and waffles : , , Fast casual and casual dining bu dining casual and casual Fast Oliver's Super Sandwiches Oliver's Super Sales of Store Growths Same

ult ubr of Numbers Outlet 91 e which serves wholesome sandwiches and tasty baked potatoes, baked tasty and sandwiches wholesome serves which respectively fo r disclaimer , Guotai Junan International. International. Junan Guotai ,

153 FY2014 32 Institutional Catering Institutional Noodles & Congee Super Super Food Fast de Coral Café s s

n at casual fast in n tae pr dmlns ild ih soup. with filled dumplings pork steamed in

156 FY2015 10% 12% 0% 2% 4% 6% 8% 35 FY2013 ,

Café Mixian Sense Kong of Hong 82

de Coral Coral de 157 business

Café de Coral Café Fast de Coral Food FY2016

40 Café , 85 the Company,the FY2014

prtn units operating siness contributed 9.4% and 10.1 and 9.4% contributed siness which which provides Mixian

de Coral and Super Superdeand Congee Super &Noodles Coral

QSR and and QSR 166 n csa dnn business. dining casual and FY2017 50 79 FY2015

Guotai Junan International. Guotai Junan Department Statistics and Source: Census Fast Food Kong RestaurantHong Receipts Figure Source: Source: Figure HKD million under 1,000 2,000 3,000 4,000 5,000 6,000 7,000 Super Super Congee Super &Super Congee Noodles 0

and Google search image search Google

36 ( 米线 eea dfeet brands different several FY2013 CDC FY2016 :

: Shanghai LaoLao The Spaghetti House Spaghetti The Café Hong Kong Hong Fast Food Restaurant Receipts YoY Growth Kong Hong QSR & Institutional Catering Sales YoY Growth of Café de Coral Kong Hong QSR & Institutional Catering Sales of Café de Coral ) and

The Spaghetti House Spaghetti The lo operates also

de Coral QSR Sales Sales QSR Coral de

a a selection of Yunnan and Sichuan dishes FY2014 In fast casual & casual dining business business dining casual & casual fast In

% to the Comp the to %

. FY2017

FY2015 which which serves gourmetShanghai

oe aaee n Korean and Japanese some

of Hong Kong of Hong

uh as such

which serves pasta and pasta serves which any's sales in FY2016 FY2016 in sales any's FY2016 Café and

de Coral de ,

the Company,the Growth lvrs Super Oliver's

FY2017 Page Page

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and 10% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% of of ) 22

Company Report Café de Coral 大家乐 (00341 HK) 8 August 2017 Se as workers district stores of chains food fast Chinese per meal price middle food fast Coral de developed city in China language and culture in similarities has Guangdong mainland 99 rate as substitution itsyears of was the high opening restaurants and of pace new was restaurants of performance The dishes. new create to them changing toalso environment catering and the new of thelosing restaurants consumers risk to exposed are dining casual & casual fast for base weekdayinchoose to consumers weekend on together get to people for place reasons two for intense rather casual is competition & but lucrative, relatively casual fast Company's to the Compared standing. years, market and few strength competitiveness, past the Over segment. the in increase FY201 Fast Source: Source: Restaurants Figure Source: Figure Catering Service e

10 20 30 40 50 60 70 80 units units of QSR

0 th e c

s 7 - asual restaurants frequently based on on based frequently restaurants las class consumers class , so the main customer ba customer main the so , the Company the Google search image search Google , the CAGR of the Company's fast casual & casual dining dining casual & casual fast Company's the of CAGR the ,

40 Café 69 t 42

China pag Total

: Mixian Sense : Mixian it it is : & e og og at aul Csa Dining Casual & Casual Fast Kong Hong

de de Coral fast food fo in in Hong Kongin c . r

asual

are Café disclaimer CDC's , Guotai Junan International. International. Junan Guotai ,

in Hong Kong. Hong in

Oliver's Oliver's Super in Sandwiches

s 19 de Coralfood fast de , dining of dining

operation in

famous for its diversified restaurants. of .

via

, mainland

but

19 FY2016 Café

fast casual restaurants casual fast

. dining

in China are mostly located in lower than full service restaurants, so its competitors are from both side both from are competitors its so restaurants, service full than lower s CDC de de Coral in CDC's The The Spaghetti , the choice of full service restaurants is broadened geographically. Second, the consuSecond,the is geographically. broadened restaurantsfull service the choice of , se for se

17 QSR restaurants is relatively is restaurants

House mainland mainland China as

FY2017 comments of of comments remarkable achieved

in is China higher fast than western likefood chains McDonald China QSR China Café prtos are operations s . Shanghai Lao Lao Shanghai

de Coral fast food fast Coral de C Mainland China CDC ompared to limited limited to ompared 9 , by providing quality food and food quality providing by

as well as close proximity to Hong Kong Hong to proximity close as well as

friends operations are operations 10 fluctuated in fluctuated at oty located mostly

31 unstable as consumers are likely to likely are consumers as unstable

or authorities' recommendations authorities' or CDC

medium growth March the Source: Source: Figure LaoLao were classified in Hong Kong QSR sector.QSR Kong in Hong classified were LaoLao Mixian Sandwiches, Super Oliver's 2015, Before Note: International. Guotai Junan Department Statistics and Source: Census Full Restaurant Service Kong Hong Receipts Figure 100 200 300 400 500 600 700 800 900 HKD million 0

was

in China is from the shoppers of mall of shoppers the from is China in the in mainland China mostly fast food sector, fast casual & casual & casual fast sector, food fast

options of of options in a way a in :

FY2012 ,

Google search image search Google f - ,

14.4% fast casual & casual dining dining casual & casual fast 41 43 irst 2017

sized but performance was unstable. was performance but : Shanghai :LaoLao Shanghai : , fast casual & casual & casual fast , n Guangdong in Café . Hong Kong ServiceHong Full Restaurant Receipts YoY Growth Coral Kong Hong Fast Casual & Casual Dining Sales YoY Growth of Café de Kong Hong Fast Casual & Casual Dining Sales of Café de Coral

. In FY2017 the Company achieved 12.0 achieved Company the FY2017 In . shopping shopping mall CDC compar FY2013 fast food restaurants around work places for places work around restaurants food fast

de Coral Fast & Coral de Casual a

mainly mainly operates leisure

able . FY2014

ly province province to Hong Kong as it mainly targets mainly it as Kong Hong to s

, serves the same dishes dining

relatively far away from working . ,

dining Therefore, and Shanghai and FY2015* try new fast casual & casual & casual fast new try

of Hong of Hong dining category different

Café experience

n Saga because Shanghai and brands have grown in in grown have brands Café

’s Kong FY2016 resta

de Coral fast

and KFC other YoY Growth

casual restaurants restaurants casual Sense, and Shanghai Shanghai and Sense, de Coral de

dining to FY2012 During s rather than office than rather

vr er every year. , put over the over . In addition, the addition, In .

the urant being

. The average The . s

Company

FY2017

pressure on Page Page

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as last five last

% YoY YoY % food 15

and

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in is

Company Report Café de Coral 大家乐 (00341 HK) 8 August 2017 Se supporting i 2011 in operation commenced centre processing food central China mainland The units. 300 about to food The new Hong Kong central food processing centre started and distribution production, the in engaged principally is Scanfoods centre. processing includes mainly segment This processing food Company's The years, tastes and marketpreferences.consumer following the in tough be still will China in operation Kong as and operational non down closed Company the as to 12.5 and 9.2% growth but FY2013, R Figure Source: Figure Source: the Company. Source: the F esults in mainland China mainland in esults 1,000 1,200 1,400 e - ood processing &

7.0% in FY2016. SSSG FY2016. in 7.0% HKD million 200 400 600 800 th 0 e las the Company the - its 44 46 t FY2013

16.3% 12.1% pag

Café : : customer base is relatively solid in Hong Kong Mainland China QSR& Revenue Mainland Food ProcessingFood e % in China QSRChina in % fo

efficienc r de Coral's de disclaimer , Guotai Junan International. International. Junan Guotai ,

FY2014 9.9% 9.4% rate Total Catering Revenue YoY Growth Growth YoY Revenue Total Catering Growth YoY Revenue QSR Mainland China Revenue QSR Mainland China y

slumped slumped

of of profitable ones. D

s in istribution business

FY2015 outhern outhern 11.1% - 0.4% are mainland China mainland , respectively , and S

canfoods not satisfactory. not remarkably - performing outlets in eastern and southern China, while strengthening the performance the strengthening while China, southern and eastern in outlets performing

DistributionCenters and China business. FY2016 14.9% - 9.2%

distribution business only contributed 2.0% to sales in FY2016 and and FY2016 in sales to 2.0% contributed only business distribution

Hn Kn cnrl od processing food central Kong Hong , . SSSG remained at low single digit single low at remained SSSG . Pressure from after FY2014. In FY2016 and FY2017 and FY2016 In FY2014. after improved significantly in FY2017, in significantly improved FY2017

- 11.5% YoY Growth 12.5%

Mainland China QSR China Mainland

(15.0%) (10.0%) (5.0%) 10.0% 15.0% 20.0% 0.0% 5.0% and

competition competition for mainland China QSR is more intense than in Hong operations

an the the loyalty of customers in China has not formed. We expect its Source: China Figure d its its d 100 120 140 HKD million 20 40 60 80 0

improvement depends on localization and reaction to to reaction and localization on depends improvement

the Company,the in April 2013 in Tai Po,which could provide processed FY2013 45 1.0% 109 : revenue Total Operating Units and SSSG and Units Total Operating s FY2014

up oa prtn Units Total Operating

Guotai Junan International. Junan Guotai 4.0% during FY2013 during 107 center experienced high growth in FY2012 and FY2012 in growth high experienced 6.0% YoY 6.0% ,

the Company recorded Company the s

ale n miln Cia eta food central China mainland and FY2015 3.0% 126

of ham and sausage products. sausage and ham of ,

but overall revenue retreated revenue overall but - FY2015, FY2015, FY2016 - 7.0% 114 Café

Mainland China SSSG Mainland China

de Coral de and then and

FY2017 YoY

n Guangzhou, n in 6.0%

Page Page Mainland

(

00341 HK 00341 decline of decline

slumped FY2017 16 (8.0%) (6.0%) (4.0%) (2.0%) 0.0% 2.0% 4.0% 6.0% 8.0% of of ) 22

Company Report Café de Coral 大家乐 (00341 HK) 8 August 2017 Se HKD1,130 benefit YoY indecline 2H to due FY2017to FY2015 during down increased decline sharp total FY2017 in 3 Source: Coral Figure HKD reach regain but YoY in consumption of trend the caught in more cultivate and sector lucrative this in business its diversify further market for Hongits Kong fast casual open restaurant new more QSR Kong Hong for demand The years. three nextover Hong growth Kong QSR of reach Revenue grew at a CAGR of Revenue Analysis Financial HKD million 5,500 6,000 6,500 7,000 7,500 8,000 8,500 9,000 9,500 - Gross profit & Operating Profit Year grossYear CAGR profit in FY e th expense of e

the Company the ting 5. las 47 FY2016 6 t 2.9% 7,567 a

%. : Historical & Forecast: Revenues Historical of over pag

8,355 million from low food prices and prices food low from and the rest the and dilemma, dilemma, but the potential is great. The Company needs to find the right direction to operate its business and catch The main driver of sales growth was and will continue to be to continue will and was growth sales of driver main The e

in fo ed the r CDC pork , Guotai Junan International. International. Junan Guotai ,

m , HKD1, , disclaimer FY

FY2017 momentum in in momentum last last three years due to the rapid growth of average Hong Kong monthly wages. illio 4.3% 7,895 17. 17. Revenue . Nearly Nearly . half and fresh vegetable fresh and n, HKD n, Gross margin was 216

ings

and FY2018F

the 8,355 5.8% administrative expenses. Raw materials and compensation contributed the greatest portion of portion greatest the contributed compensation and materials Raw expenses. administrative million 8,856 5.4

are i nstitutional mainland China market. The Company's revenue growth sl growth revenue Company's The market. China mainland FY2017 2017 % from of of

expected to drive growth of of growth drive to expected m

, and, HKD raw and FY2019F the illio 6.0% 8,856 moderately - FY a

food food n casual casual dining Growth

launch of premium dishes premium of launch slowdown FY2013 2020 with 4.3% YoY growth. We expect the Company's revenue in FY in revenue Company's the expect We growth. YoY 4.3% with , HKD9,294 and price c atering atering materials of of materials 1,269 1,269 FY2020F

s in s is 5.0% 9,294 Café

to declin expected reachto 1H17 in to average at million FY2017

de de revenue growth rate and and rate growth revenue restaurants 0% 1% 2% 3% 4% 5% 6% 7% ed and i and ,

CDC but

m over the , up

illio and and 3 Figure Figure Source: Source: nstitutional catering of of catering nstitutional is 1,500 1,500 3,500 5,500 7,500 9,500 HKD HKD million YoY Mainland China Mainland QSR Kong Hong QSR & Institutional Catering are from China prices mainland from whereare food (500)

its n expected to expected , up up , 5.5 is huge but competition is Hong Kong QSR Kong Hong -

. last five years Year revenue CAGR in FY the Company,the by 48 % and fast% casual We expect its gross profit in FY in profit gross its expect We YoY 6.3 FY2016 6.9 : Revenue of of Composition 5,595 5,595 1,119 709 144 profitab %

%, %, by . the

Cost Cost of sales contributed remain

5.8%, 6.0 5.8%, 7.6

Hong Kong catering sector. We expect sales expect We sector. catering Kong Hong Guotai Junan International. Junan Guotai a le

%,and FY2017 rise but 5,968 5,968

794 979 155 etuat. anad hn QR s still is QSR China Mainland restaurants.

Café stable in stable

and

is expected to in %, and %,and 5. and

expenses 4.4

i de Coral is solid in Hong KongandHong in solid is Coral de nstitutional FY2018F

%. casual diningcasual owed down in FY2016, up 2.9% up FY2016, in down owed 6,378 6,378 Food Processing Food & Others Kong Hong Fast Casual & Casual Dining also 855 965 158 2H17

20 0

intense, so 1 , and even recordedeven and , G %,respectively. 7 . Staff cost Staff . ross ross profit growth slowed slightly

- FY2019F

FY catering business catering 20 94.1% to total expense Café 6,711 6,711 1,024 959 Café 162 20 1

8 to average 9.5 at

de Coral de 1 - FY2020 fell improve

9 20 de Coralde CDC

is expected to s

, 1 FY2020F

driven driven by the have 8 7,000 7,000 1,043 1,085 166 Page Page

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FY 00341 HK 00341 is is going to

to reach to in FY18 20

notably 17 - . The . 20 8.2%

of of

) 22 % to

Company Report Café de Coral 大家乐 (00341 HK) 8 August 2017 Se non closing by profitability improved and foundation operational its enhanced has CDC declined gr to expected is profit Net Source: Café Figure FY1in profit slightly to margin operating its expect wemargin, gross of improvement 8.1 of CAGR 3 Company.of the expense total represent red in numbers The Note: Source: breakdown Figure Source: Coral Figure 100 200 300 400 500 600 700 800 1,000 1,100 1,200 1,300 1,400 HKD million - Net Net profit HKD million 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 Year Year 600 700 800 900 e 0 i FY201 in % th 0 e de Coral de

the Company the Company the the Company the las FY2016 operating 49 5 5 - Other expenses Utility cost Food cost FY2016 13.1% 13.8% 1 3 615 2.1% 1,045 over the FY2016 t

2,360 2,193 6,953 - : Historical & Forecast : Historical & Forecast: Historical : pag 867 390 303 727 1.6% from 1.6% Café

- e FY fo Gross Profit Gross ad .% n FY2017 in 7.8% and 6 r , Guotai Junan International. International. Junan Guotai , International. Junan Guotai , International. Junan Guotai , FY2017 de Coral'sde 20

last last five years, and even recorded - disclaimer

FY2017 2.0% profit profit CAGR in FY 13.4% 603 1,057 1.2% Operating Operating profit FY2017

2,420 2,456 7,269 to reachto 930 381 313 645 FY2013 to FY2017 to FY2013 D&A D&A cost cost Staff FY2018F

10.2%

FY2018F

665

13.5% Expense by Nature 1,130 6.9% FY2018F HKD665 ow at a CAGR of CAGR a at ow 7,678 2,573 2,635 986 418 224 711 Growth Gross Profit OperatingProfit FY2019F FY2019F 201 8.5% 721 13.7% million 1,216 7.6% FY2019F A&P expense Rental cost

2,727 2,808 1,027 8,119

434 243 742 . 7 u t te ai growth rapid the to due The Company's operating margin margin operating Company's The - FY Growth Gross Margin Gross , HKD FY2020F 2020 3.7% FY2020F 748 1,269

13.7% of 4.4% 7.4 FY2020F 2,863 2,926 1,078 8,528 721 Café 455 283 778

is is

% from FY2017 from % decrease

of expected to reach

- - - 0% 5% 10% 15% million 15% 10% 5% 10% 12% 14% 16% 0% 2% 4% 6% 8%

s s in growth of , and HKD and , R Figure Company.of the expense total represent red in numbers The Note: Source: andby sales of Cost Administrative Expense Figure Source: Source: Figure Source: 10.0% 11.0% 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 egion 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 0 in the Company,the the Company,the Company,the

5 50 5 to FY2 to 17%

FY2015 2

4 expenses FY2016 9.6% 8.2% 9.8% 6,523 6,953 : :

748 430 6% : Margin : Margin Analysis of recover in FY2018 in recover Café Café 7. Operating Operating Margin

11.7% 11.7% 6% 18%

4 million Cost of sales of Cost 020 remained %

de de Coral's de Coral's de 4% FY2016

. Guotai Junan International. Junan Guotai Guotai Junan International. Junan Guotai International. Junan Guotai 8.1%

6.8% 8.3% . The Company's operating profit declined at a . 1%

FY2017A Café 6,838 7,269 YoY and 2.7% Due to the rise rise the to Due 431 , up ,

de Coral's Coral's de YoY at 9.6 at FY2017 7.6% 6.4% 7.8% Administrative expenses Administrative

Food - Total efrig trs n rfnn its refining and stores performing - FY2018F

48% FY2020. FY2020. by 7,678 7,225 % 453 PBTMargin Café 10.2 FY2018F in FY2015, b FY2015, in O Expense Expense

8.0% 6.6% 8.1% YoY in FY2016 rigin rigin net profit net

%, in de Coral

We expect its operating its expect We

FY2019F South Africa South Europe Kong Hong Zealand New and Australia Countries OtherAsian America South North & China Mainland Café operational scale and and scale operational 7,640 8,119 8.5 by 479 FY2019F 8.1% 6.8% 8.3% %, and %, Breakdown

G de Coral de has eographical eographical ut went ut

PAT PAT Margin

FY2020F

continuously FY2020F and

8,025 8,528 8.0% Page Page 3.7

503

6.7% 8.2% ( 00341 HK 00341

%. down to down FY 18

201 of of

) 22

Company Report Café de Coral 大家乐 (00341 HK) 8 August 2017 Se investors accumulatethat shares duringdips. price for rating generously Company full profitability competitiveness. in companies the adapt to promptly act to needs mainland fast food market for casual fast in Kong HK$2 of TP with Initiate Valuation Source: Coral Figure to normal their levelreturn in remained ROAROE and while respectively, the forecast the period EPSfor FY18 in profit services. and products 400 450 500 550 600 650 Source: Source: Figure HKD million e netmargin the -

10 15 20 25 30 service catering group, and we have seen its growth potential in potential growth its seen have we and group, catering service th 0 5 , e

Hong Kong market, which is a cash cow for the Company the for cow cash a is which market, Kong Hong the Company the FY2016 with - las 2012/7 11.7% (x) 5 518 the Company the - 5 5 t

CDC around 16% and 13 : Historical 7 pag PER PER (low) PER (historical)

recorded ; a : PERCurve (next year) for

u t is oi csoe bs and base customer solid its to due and we . In In forecast . our model, solid market share and strong cash flow. We believe the Company's fast food business can maintain its position its foodcan maintain the businessCompany's fast believe flow. cashand We strong share solid market e

FY20 the the fo and set TP at HK$ at TP set and expect expect that the Company will

fell in FY2016 in fell FY2017 r casual dining casual , -

2013/7 2.7% 504 disclaimer No Guotai Junan International. International. Junan Guotai , Guotai Junan International. Junan Guotai , Hong Kong market, market, Kong Hong

ih aot ais (77.2%/ ratios payout high to reach HKD555 reach to Net Net Profit matter and We expect We 6 FY2018F

. Forecast

10.2% , ROE in1 which, will average at Cafe de Coral 555 2014/7 5

0 and “Accumulate” and 0 how PER PER band PER (current) % CDC - category FY2017 over the the global global the 26.50

is is huge as net margin to improve in FY2018 in improve to margin net FY2019F latest without special dividendnew and issuance of in, shares factored Growth Growth Net 8.5%

2015/7 603

and and

million , which represents represents which ,

may may CDC Café last last five years, Profit

trend is

macro economy macro maintain

FY2020F enable the Company to to Company the enable

customer customer demand for healthy Chinese fast food de Coral de HKD603 , rdd t peim valuation premium a at traded expectedriseto slightly in 3.7%

625 s PER PER (high) 2016/7 of

stable of China's fast fast China's of 130.5%/ is Café

investment

HKD 0.

a (15.0%) (10.0%) (5.0%) 10.0% 15.0% 0.0% 5.0%

but but high de demand for for demand

million

2017/7

41 i FY15/ in 94.1% 27. sl 6.4 949

payout payout rate

ightly slumped to 14.4% and 11.5% in FY2016 Source: Source: Figure fluctuates 9 Source: Source: Figure % 16.0% 18.0% 10.0% 12.0% 14.0%

/ HKD / x/ ad HKD625 and , . rating. 4.0% 6.0% 8.0% 0.0 1.0 2.0 3.0 4.0 5.0 6.0

moving moving On the other hand, d hand, other the On

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the healthy - 5 the Company the

2012/7 7 st 6.7%. 6.8%/ 6.6%/ to FY2020 - (x) 6 1.030 5 cultivate new successful brands. successful new cultivate x/ 12.8% 16.0%

FY2013 PBR PBR (low) PBR (historical) 8.5% : , we believe believe we , 8 CDC

ROA .

market. dining casual and casual fast ROE and ROAROE and of : 24 As a result, we initiate with “Accumulate” catering catering

PBR Curve (current year)PBR Curve (current for FY2018 .

/ HKD/ 8

FY16/ at od Te opn i wrig toward working is Company The food. fast 12.9% 16.0% will is the largest listed fast food company in Hong in company food fast listed largest the is x FY201 x ROE FY2014 8.3%

Guotai Junan International. Junan Guotai u to due million

, 2013/7

Guotai average average at market. Compared to other listed catering listed other to Compared market. 1.067

. 12.9% 15.8% FY2015 8.0% FY17) The Company's

that

up , 8

Junan International. Junan iversified operation iversified t laig akt hr ad st and share market leading its /

, respectively., FY201 Cafe de Coral the Company the

2014/7 11.5% 14.4%

FY2016 PBR PBR band PBR (current) 6.8% YoY Café n hs eadd shareholders rewarded has and ROA 12 is .

7 risi by 11.3% 14.3%

FY2017 / 6.4% % fromFY201 de Coral de

ng 2015/7 3.7% and 8.5%, 10.2%,

We estimate estimate We 2020 ROE and ROAROE and , but the Company truly the ROE and ROA will

Café

FY2018F 12.3% 15.8% 6.6%

can The potential of potential The s Net Net Margin Café

de Coral de

PER. We suggest We PER. in ,

affected by FY2019F 13.0% 16.6% still maintain its maintain still

PBR PBR (high) 6.8% the

2016/7

Moreover, the the Moreover, 8

de Coral de

to FY Page Page

Hong KongHong ( investment CDC's net CDC's 00341 HK 00341 13.0% 16.7% FY2020F 6.7% 19 2020

rong

of of 2017/7

s the fall

)

a . ,

Company Report Café de Coral 大家乐 (00341 HK) 8 August 2017 Weighted Average Simple Average ChipotleMexican Grill Inc Yum! BrandsInc Restaurant BrandsIntern StarbucksCorp Mcdonald'SCorp USA Weighted Average Simple Average Xi'AnCatering ChinaQuanjude Group GuangzhouRestaurant China Weighted Average Simple Average BaoLi GeGroup Ltd AjisenChina Holdings Ltd FairwoodHoldings Ltd XiabuxiabuCatering Ltd De Coral Holdings Café HK Se in shown are valuation. from excluded which is isoutlier * 1. Note: Source: Bloomberg Company Table e

- th

3. Different companies have have companies Different 3. G ROE, and year calendar to adjusted are PBR and PER their 12/31, than other ended year with financial companies those For 2. - Listedcompanies e Listedcompanies - 4 las Listedcompanies :Comparison Peers t

2 pag 017 e

in table for comparison table for in fo .

disclaimer

CMGUS YUMUS QSR US SBUXUS MCDUS 000721CH 002186CH 603043CH 8102HK

520HK 341HK 538HK various 52HK Ticker

method to calculat to method

USD USD USD USD USD HK HK HK HK HK $ CNY CNY CNY

D D D D D

Price 339.450 154.970 32.700 25.150 19.290 22.140 7.960 74.990 62.160 55.630 1.190 3.370 7.320

e gross margin. e gross Market

(HK

Cap mn)

10,409 14,721 204,228 224,399 628,191 987,844 4,251 6,925 8,509 1,679 3,678 4,177 75,691 D

2017

197.8 118.3 51.4 38.7 22.8 20.2 18.6 16.3 20.3 17.0 28.9 n.a. 43.9 26.6 33.2 27.0 23.8 26.6 30.9

E (x) PER

177.2 318.3 2018 74.3 36.2 20.8 18.5 15.9 15.0 20.3 14.8 26.3 n.a. 30.8 23.5 24.5 23.5 22.3 23.2 24.9

106.8 260.6 488.0 2019 33.3 18.4 16.2 12.8 12.6 19.0 12.7 23.7 n.a. 23.9 20.3 21.9 20.1 20.6 20.6 21.4

B (x) PBR

2017 n.a. n.a. 3.8 3.2 1.4 1.0 5.8 3.7 4.2 n.a. n.a. n.a. 10.3 13.4 - n.a. 6.6 4.9 6.6 3.7

2017 ROE 17.3 16.2 29.5 23.3 14.3 n.a. 15.3 40.0 39.1 43.7 40.4 34.6 (%) 3.8 6.4 2.8 7.8 6.1 n.a. 10

Café M as well as OM of FY1 of OM well as as M Margin Gross 20 de Coral de 18.3 49.4 23.3 60.1 46.5 27.4 50.2 38.9 61.5 36.4 47.3 71.5 71.6 15.5 64.4 13.4 47.3 39.5 (%) n.a. 17 *

Page Page

( 00341 HK 00341 Margin(%) Operating 2017 29.9 40.8 19.8 39.1 10.9 10.1 10.7 15.4 31.5 27.5 n.a. 20 7.8 4.1 7.1 3.3 9.7 5.3 9.7 7.5 of of

)

Company Report Café de Coral 大家乐 (00341 HK) 8 August 2017 Se Source: end year at balance Cash beginning at balance Cash effect exchange Foreign equivalents cash and in cash Change flow cash Financing paid Dividends repurchased Share issued Shares flow cash Investing Others PP&E of Purchase flow cash Operating Others capital working in Change of Depreciation tax income before Profit m) (HK$ Mar end Year (HK$) DPS (HK$) EPS Net Profit Minority interests operation discontinued from Loss tax after Profit tax Income tax before Profit associate an of Share net income, Interest Profit Operating expenses Administrative Other Profit Gross of sales Cost Revenue m) (HK$ Mar end Year Statement Financial e th income/gains e

the Company the las

pag

PP&E

r , Guotai Junan International. Junan Guotai ,

disclaimer

Cash Flow Statement Flow Cash Income Statement

(6,523) FY16A FY16A

1,187 1,057 1.174 0.900 1,045 7,567 (463) (456) (179) (360) (430) (110) (110) (37) (36) 139 139 181 781 299 628 518 518 628 615 (9) 29 13 1 0 0 0

(6,838) FY17 FY17

1,187 0.810 0.870 1,057 7,895 (379) (662) (670) (593) (596) (109) (431) (23) (18) (17) (48) 876 876 309 613 504 504 613 603 790

(0) 26 10

A A 3 2 0 0

(7,225) FY18F FY18F 1,130 8,355 0.810 0.949 (454) (474) (308) (350) (102) (453) (118) (12) 790 790 836 221 673 555 556 673 665 864 (2) (0) 74 22 42 44 0 0 0 9

(7,640) FY19F FY19F 1,216 8,856 0.820 1.030 (476) (474) (340) (360) (128) (479) (119) (15) 864 864 852 239 731 603 603 731 721 900 (2) (0) 36 20 10 0 0 1 0 0

(8,025) FY20F FY20F 1,034 0.830 1.067 1,269 9,294 (133) (503) (482) (480) (339) (360) (116) (18) 280 280 758 625 625 758 748 900 900 133 955 (0) (2) 10 21 34 0 0 0 0

(%) Growth Profit Gross (%) Growth Revenue (HK$) BPS equity Shareholders' liabilities Current Others payables Trade Non Others Provision assets Current Others equivalents cash Cash & receivables Trade Inventories Non Others PP&E m) (HK$ Mar end Year Payout ratio (%) ratio Payout (x) cover Net interest (%) Net gearing (x) Ratio Quick (x) Ratio Current cycle conversion Cash days turnover Payable days turnover Receivable days turnover Inventory (%) ROE (%) ROA (%) Margin Net (%) Margin Operating (%) Margin Gross (%) Growth Net Profit (%) Growth Profit Operating

- -

current liabilities current assets current

Net Cash Net Incomer FY16A FY16A (13.1) (11.7) 3,542 1,664 1,187 2,781 1,052 1,729 6.063 130.5 Financial Ratios Financial 10.6 10.6 10.7 14.4 13.8 11.5 Balance Sheet Balance 802 588 214 101 175 215 2.1 2.9 1.8 2.1 5.7 5.6 6.8 8.1 Net Net 49 52 87

Net Cash Net Incomer FY17 FY17 3,491 1,276 3,161 1,217 1,944 5.971 (2.7) (2.0) 94.1 94.1 10.3 10.5 14.3 13.4 11.3 846 635 100 148 790 240 211 1.2 4.3 1.2 1.5 4.5 4.3 6.4 7.6 Net Net 54 46 97 A A Café

Net Cash Net Incomer FY18F FY18F

de Coral de 3,556 1,405 3,193 1,157 2,035 6.068 85.4 85.4 10.8 10.7 15.8 12.3 13.5 10.2 10.2 933 650 283 108 132 864 159 250 6.9 5.8 1.2 1.5 5.5 5.6 6.6 8.0 Net Net 58 50

Net Cash Net Page Page Incomer

FY19F FY19F ( 3,688 1,412 3,295 1,175 2,120 6.293 00341 HK 00341 79.6 79.6 10.7 10.7 16.6 13.0 13.7 902 667 236 135 900 108 269 117 7.6 6.0 1.3 1.6 5.5 5.5 6.8 8.1 8.5 8.5 Net Net 62 55 21

Net Cash Net of of Incomer FY20F FY20F 3,817 1,609 1,034 3,333 1,172 2,161 6.514 ) 22

77.8 77.8 10.7 10.7 16.7 13.0 13.7 998 688 309 127 128 172 275 1.3 1.6 5.5 5.5 6.7 8.0 3.7 3.7 4.4 5.0 Net Net 67 61

Company Report Café de Coral 大家乐 (00341 HK) 8 August 2017 Se Website:www.gtja.com.hk Tel.:(852) 2509 27/F.,Low Block, GrandMillennium Plaza, 181 Queen’s Road Central, Hong Kong. 201 © regulati or subjectGuotai law Junan and groupits applicablecompanies any to registration or to licensingrequirement wi contrary be would use or availability publication, distribution, such where jurisdiction any in Research This Report isnot directed at,or intended distributionfor to orby,use any person orentity who isa orcitizen unpredic andwhere necessary consult their own inherently financial advisers prior to any investment decision. with conditions economic and political futureinvestme comprehendthe understandand shouldInvestors contain. uncertainty may the so situation, mutable of assumptions the from derived forecasts and estimates so contain may ReportResearch This herein. dataand information the ofcompleteness and accuracy the guarantee not Thoughbest effort has been ensuremade to the accuracy of the information and data containedin this ResearchReport, Guotai becontrary to opinions orinvestment decisions madeby assetthe managementand investment banking groups of Guotai Junan perso Any opinions expressed in this report may differ or be contrary to opinions or investment strategies expressed orally or in w orinvest proprietarily). research reports, including investment banking, investment servi ( Limited Kong) (Hong acquire, to offer or invitation an constitute not does Report Research This DISCLAIMER (6) (5) (4) (3) (2) (1) DISCLOSURE OF INTERESTS Horizon: Time to6 18 months TheBenchmark: Hong KongHang Seng Index SectorRating Definition Horizon: Time to6 18 months TheBenchmark: Hong KongHang Seng Index CompanyRatingDefinition e Underperform Neutral Outperform Rating Sell Reduce Neutral Accumulate Buy Rating

th Report. There isnoofficer of the issuer mentionedin thisResearch Report associated with Guotai Junanandgroup its compan the ofofficer an as servingindividual an employednot havecompanies group its and Junan Guotai Report. companies group its and Junan Guotai withinprethe notGuotai Junan and its group companies do companies group its and capitalizationof the issuer mentionedthisin Research Junan Report. Guotai HK), (03157 SCSMALLCAP CAM I AMSCI GFI HK), (08237 Limited Holdings Link HK), (02886 Limited ( Company Limited Group Holdings SMI for Except The Analystsand their associates The Analystsand their associates ns, dealers and other professional executives of Guotai Junan group of companies. Any opinions expressed in this report may d report may this professionalopinionsexpressedcompanies.in otherdealersAnyandexecutivesGuotai Junan of group of ns, 7 e

las GuotaiJunan Securities(Hong Kong) Limited. AllRights Reserved.

t pag

e -

18 Fax:(852) 2509 9118 fo ceding12 months. r disclaimer

Goa Jnn) Goa Jnn n is ru cmais a d bsns ta rlts o opne cvrd in covered companies to relates that business do may companies group its and Junan Guotai Junan"). "Guotai

RelativePerformance is orfundamentalthe outlook of the companyor sectoris favorable. RelativePerformance is5% to 15%; orfundamentalthe outlook of the companyor sectoris favorable. RelativePerformance Definition orfundamentalthe outlook of the companyor se RelativePerformance < orfundamentalthe outlook of the companyor sectorisunfavorable. RelativePerformance is or orfundamentalthe outlook of the sectorisunfavorable RelativePerformance orth Relative orfundamentalthe outlook of the sectoris favorable RelativePerformance Definition

the fundamentalthe outlook of the companyor sectorisneutral. e fundamentale outlook of the sectorisneutral

dohavenot any donot serve Performance

- 7793 have not had are not making not are

00198

asanofficer of the

is >15%; < >5%;

- - K, uti Juna Guotai HK), financialinterests relationin to the 15%; 5%; - - -

5%to 5%; 5%to 5%to 5%; investment banking relationships with the

a market in the securities in respect of the issuer mentioned in this Research this in mentioned issuer the of respect in securities the in market a - ces 15%;

, , etc.

issuer

(for example, the placing agent, lead manager, sponsor, underwriter Itrainl odns iie (18 H) Bna Investment Binhai HK), (01788 Limited Holdings International n

purchase or subscribe for securities by Guotai Junan Securities Junan Guotai by securities for subscribe or purchase

mentionedin thisResearch Report. ctorisunfavorable. .

- . R (CNY) (83156 HK), GFI MSCI A I (03156 HK) and HK) (03156 IA MSCI GFI HK), (83156 (CNY) R

issuer od qa t o mr ta 1 o te market the of 1% than more or to equal hold thin such thin jurisdiction.

mentionedin thisResearch Report. issuer

mentioned in this Research Report issuer mentioned in this Researchthis in mentionedissuer nt objectives and its related risks,related its andobjectives nt

Café

re de Coral de me forwardme sidentor of located ritten form by sales on or which would which or on

Page Page

( . Junandoes 00341 HK 00341

table and and table ies. - 22 looking iffer or

of of ) 22

Company Report Café de Coral 大家乐 (00341 HK) 8 August 2017