Hong Kong Catering Industry Is Experiencing Unprecedented

股

票

研 [Table_Title] Barney Wu 吴宇扬 Company Report: Café de Coral (00341 HK)

究 (86755) 2397 6680 EquityResearch 公司报告：大家乐 (00341 HK) [email protected]

14 April 2020

[Table_Summary]

Hong Kong Catering Industry Is Experiencing Unprecedented

公 Difficulties, but Café de Coral Will Hold Out Until End

司香港餐饮行业正经历前所未有的困难，但大家乐会挺到最后

报  The catering industry in Hong Kong was hit hard by the COVID-19 Rating:[Table_Rank] Accumulate 告

pandemic in 1Q2020. Demonstrations in Hong Kong had severely impacted Maintained CompanyReport the catering industry in 2H2019. Although public demonstrations have shown signs of easing in 1Q2020, the recovering catering industry of Hong Kong was 评级：收集 (维持) hit hard again by the COVID-19 pandemic. The COVID-19 pandemic will continue to hurt the Hong Kong catering industry. Fast food restaurants are 6[Table_Price]-18m TP 目标价 : HK$18.20

less affected than other catering business categories, but challenges from the Revised from 原目标价: HK$21.20 告

ever-changing external environment are unavoidable. Share price 股价: HK$15.720 证

 报 Mainland China’s catering is recovering slowly. The catering industry has

券 borne the brunt of the COVID-19 pandemic, and an industry reshuffle may 究

研 accelerate. As China has effectively controlled the outbreak of the COVID-19 Stock performance

研 pandemic, China's catering industry has been gradually recovering. But the 股价表现究

table turnover rate in most restaurants still remained low as consumers are [Table_QuotePic] 券 ResearchReport 50.0 % of return 报 still afraid of going out due to imported cases. Café De Coral's revenue has 40.0 证 shown recovery as the working class maintains strong demand for fast food in

告 30.0 Equity Shenzhen and Guangzhou. 20.0

10.0

 Due to worse earnings forecasts, we lower our TP to HK$18.20. But due to healthy financial position, loyal customer base and strong bargaining power 0.0 [Tab with landlords, we expect that Cafe de Coral will outperform its peers in Hong (10.0) (20.0) Kong market. Moreover, the Hong Kong government's Anti-epidemic Fund will le_I (30.0) provide Café de Coral with subsidies to counter the pandemic. Therefore, we nfo1 (40.0) 消 maintain "Accumulate" but lower TP to HK$18.20, which represents Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 HSI index Cafe de Coral 费] 83.8x/29.3x/19.2x FY20/FY21/FY22 PER. 行  香港餐饮业在 2020 年第 1 季度受到新冠疫情带来的重创。2019 下半年，香港的示威活动业严重影响了餐饮业。尽管示威活动已在 2020 年第 1 季度有所缓和，但刚刚恢复的香港餐 Change[Table_PriceChange] in Share Price 1 M 3 M 1 Y

Food Beverage & Food - 食饮业又因新冠疫情的流行再受严重破坏。疫情将持续损害香港餐饮行业。与其他餐饮业态股价变动 1 个月 3 个月 1 年相比，快餐连锁业态受的影响较小，但外部环境的不断变化将不可避免地带来挑战。 Abs. % 1.9 (19.8) (19.3) 品绝对变动 %  大陆餐饮正在缓慢复苏。餐饮行业遭受新冠疫情重创，行业料将加快重新洗牌。随着中国饮 Rel. % to HS Index 5.7 (5.1) (0.4) 相对恒指变动 % 料有效地管控了新冠疫情的蔓延，中国的餐饮行业正在逐渐复苏。但是在大部分的餐厅翻台

Avg. Share price(HK$) 14.0 16.5 20.4 率仍然较低，因为输入性案例的影响使消费者仍然谨慎外出。因为深圳和广州上班族保持平均股价（港元）

了对于快餐强劲的需求，大家乐收入有所复苏。 Source: Bloomberg, Guotai Junan International. ConsumerSector  因为更差的盈利预测，我们下调目标价至 18.20 港元。但因为健康的财务状况、忠诚的消费者基础和与房东较强的议价能力，我们预计大家乐将跑赢香港市场同业。另外香港政府

的防疫抗疫基金将为大家乐提供补助对抗疫情。因此，我们维持“收集”评级但下调目标价 [Tab 至 18.20 港元，相当于 83.8 倍/29.3 倍/19.2 倍 2020 财年/2021 财年/2022 财年市盈率。 le_I Y[Table_ear End Turnover Net Profit EPS EPS PER BPS PBR DPS Yield ROE Profit] nfo2 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$) (%) (%) 2018A 8,427 458 0.790 (9.4) 19.9 6.096 2.6 1.160 7.4 13.0 大 2019A 8,494 590 1.017 28.7 15.5 5.422 2.9 0.840 5.3 17.5 家 2020F 7,598 120 0.205 (79.8) 76.7 4.944 3.2 0.190 1.2 4.0 乐 2021F 8,120 344 0.587 186.3 26.8 5.327 3.0 0.390 2.5 11.4

2022F 9,335 525 0.897 52.8 17.5 5.820 2.7 0.590 3.8 16.1 [Table_BaseData]Shares in issue (m) 总股数 (m) 586.0 Major shareholder 大股东 Family Lo 43.6% Market cap. (HK$ m) 市值 (HK$ m) 9,211.9 Free float (%) 自由流通比率 (%) 56.4 Café de Coral (00341 de HK) Coral Café 3 month average vol. 3 个月平均成交股数 (‘000) 1,430.9 FY21 Net gearing (%) FY21 净负债/股东资金 (%) Net Cash 52 Weeks high/low (HK$) 52 周高/低 (HK$) 12.600 / 26.900 FY21 Est. NAV (HK$) FY21 每股估值（港元） 23.8

Source: the Company, Guotai Junan International. See the last page for disclaimer Page 1 of 7

[Table_PageHeader]Café de Coral (00341 HK)

Hong Kong Business Review and Outlook

] 1 r a M t h g i R _ e l b a T [

The Catering industry in Hong Kong was hit by a series of demonstrations in 2H2019. Demonstrations in Hong Kong

severely impacted the catering industry in 2H2019. According to the Census and Statistics Department of Hong Kong, total restaurant receipts in 3Q2019 and 4Q2019 fell by 11.8% YoY and 14.3% YoY, respectively. In 4Q2019, Chinese restaurant receipts and non-Chinese restaurant receipts fell by 19.2% YoY and 15.1% YoY, respectively. From June to November 2019,

the city's catering business suffered from a total loss of about HKD10.5 billion, down 15-20% YoY, according to Simon Wong 14 April2020 Ka-wo, president of the Hong Kong Federation of Restaurants and Related Trades.

Hong Kong catering industry was hit by the COVID-19 pandemic. Public demonstrations recently showed signs of easing

in 1Q2020, but the recovering Hong Kong catering industry was damaged hard again by the COVID-19 pandemic, which significantly reduced the number of tourists arriving in Hong Kong and significantly lowered residents' desire to eat out. Mr. Wong pointed out that total revenue of the Hong Kong catering industry fell by 40% YoY in 1-3M2020 and wedding & banquet business dropped by 70%-80% YoY.

Figure-1: Total Hong Kong Restaurant Receipts & YoY Figure-2: Total Restaurant, Chinese Restaurant, Growth Non-Chinese Restaurant and Fast Food Restaurant

] 2 r a M t h g i R _ e l b a T [ Receipts & YoY Change

Total Hong Kong Restaurant Receipts YoY Growth HKD billion Total Hong Kong Restaurant Receipts 15.0% Chinese Restaurants Receipts YoY 34 Total Hong Kong Restaurant Receipts YoY Growth 15.0% Non-Chinese Restaurants Receipts YoY 10.0% 32 10.0% Fast Food Restaurant Receipts YoY Growth 5.0% 30 5.0%

28 0.0% 0.0%

12 13 14 15 17 18 16 19

12 13 15 16 17 18 14 19

12 12 14 14 15 15 16 17 17 18 19 19 13 13 16 18

------

26 -5.0% -5.0%

Jun Jun Jun Jun Jun Jun Jun Jun

Mar Mar Mar Mar Mar Mar Mar Mar

Sep Dec Sep Dec Sep Dec Dec Sep Dec Sep Sep Dec Sep Dec Sep Dec

24 -10.0% -10.0%

22 -15.0% -15.0%

20 -20.0%

-20.0%

12 13 14 15 17 18 19 16

12 14 15 16 17 18 19 13

12 14 15 16 18 19 13 17

------

(00341 HK)

------

Jun Jun Jun Jun Jun Jun Jun Jun

Sep Sep Sep Sep Sep Sep Sep Sep

Dec Dec Dec Dec Dec Dec Dec Dec

Mar Mar Mar Mar Mar Mar Mar Mar -25.0%

Source: Census and Statistics Department of Hong Kong, Guotai Junan Source: Census and Statistics Department of Hong Kong, Guotai Junan 大家乐 International. International.

The COVID-19 pandemic will continue to hurt the Hong Kong catering industry. Hong Kong reported a total of 1,010

COVID-19 cases as at 13 Apr 2020. Active cases amounted to 609, while the number of recovered and deaths recorded 397 Café de CoralCafé and 4, respectively. Hong Kong extended its airport closure to foreign arrivals as roughly three-fourths of total COVID-19 cases over the past two weeks were tied to travelers or close contact with arriving travelers. Regarding the direction related to the catering business, issued in accordance with the Prevention and Control of Disease (Requirement and Directions) (Business and Premises) Regulation (Cap. 599F) under the Prevention and Control of Disease Ordinance (Cap. 599), the Government required catering premises to follow 6 measures starting from 28 March 2020. The measures include: ensuring the number of customers must not exceed 50 per cent of the normal seating capacity of the premises; a distance of at least 1.5 meters between one table and another table is maintained or other partition arrangements are made; no more than four persons are seated together at a table; a person must wear a mask except when he/she is consuming food or drink on the premises; body temperature screening on persons entering the premises is conducted and hand sanitizers are provided for them.

Relatively speaking, Café De Coral has been less affected than other catering business types, but challenges from the ever-changing external environment are unavoidable. Leading Chinese fast food giants, such as Café de Coral, have also been impacted by external conditions, whose sales may decline 30% YoY in Feb.-Mar. Moreover, the Company's institutional

catering business has been greatly impacted as schools cannot reopen. Relatively speaking, due to the stable local consumer Report group, Café De Coral's quick service restaurants in Hong Kong have been affected less than those of other full-service

restaurants. Takeaway services provided by fast food outlets have become popular in Hong Kong as residents now feel safer

to enjoy their set meals at home/office rather than inside restaurants. Comparing to full-service restaurants, fast food Company restaurants will to some extent recoup their losses by linking the brand not only to convenience, food safety and standardized

See the last page for disclaimer Page 2 of 7 [Table_PageHeader]Café de Coral (00341 HK)

flavors, but also to in-home meal occasions, given that consumers will be keen to continue such habits in Hong Kong. Café de

Coral's takeaway sales recently surged, accounting for over 20% of total sales. We expect] 1 thatr Caféa M t Deh Coralg i willR _ continuee l b toa T [

suffer from an extremely challenging external environment, but staff costs and rental costs have more downside potential for

Café De Coral.

Mainland China Business Review and Outlook

14 April2020 Mainland China catering enterprises suffered as a result of the COVID-19 pandemic during 1Q2020. As dining together is a very likely way for the virus to spread from person to person, most restaurants in mainland China had closed at their own discretion or by government instruction since the COVID-19 outbreak. Restaurants, especially large Chinese restaurants, usually peak during the Spring Festival period, but their revenues have almost been zero this year. According to the National Bureau of Statistics, restaurants and catering services saw revenue plunge by 43% YoY in January and February as Chinese consumers minimized their engagement in social activities.

Since March, the catering industry has been recovering, though slowly. Due to the Chinese government's strong and effective prevention measures, new cases of Covid-19 in mainland China have been significantly reduced, most of which have been imported cases from overseas. Since mid-March, there were only a few new cases of infection in China and most new

] 2 r a M t h g i R _ e l b a T [

cases were from overseas sources. As people are returning to work and production is resuming, China's catering industry has been gradually recovering. According to Meituan, overall work resumption rate of restaurants reached 83.9% by 31 March 2020. On the other hand, in some regions, customers have been encouraged to dine in at restaurants. According to the Ministry of Commerce, revenue generated by China's 3,000 key restaurants recovered by over 30% by 25 March 2020 as compared to the lowest point in February. Meanwhile, local municipal authorities across the country are offering catering coupons and vouchers to the residents through various online platforms in order to boost on-site catering consumption. Moreover, value-added taxation has been exempted for restaurant and catering business owners during the COVID-19 outbreak period. However, as imported cases of COVID-19 from overseas have increased considerably and flow of people has

increased after resumption of work and production, customers, especially in tier-1/2 cities, are afraid of going out. The table

turnover rate in most restaurants still remains low. We expect that the catering industry will still be hurt before the COVID-19 pandemic ends.

(00341 HK) Figure-3: Total Catering Revenue YoY Change in China Figure-4: Total Catering Revenue of Enterprises Above

Designated Size YoY Change in China 大家乐

Total Catering Revenue :YoY 20% Total Catering Revenue of Enterprises Above Designated Size YoY Total Catering Revenue: YTD YoY 20% Total Catering Revenue: YTD YoY 10% 10%

0% Café de CoralCafé 0% -10% -10% -20% -20%

-30% -30%

-40% -40%

-50% -50%

13 15 16 17 18 14 19

13 14 16 18 19 20 15 17

13 14 15 16 18 17 19

13 15 17 19 14 16 18

13 15 17 19 14 16 18 20

14 16 18 13 15 17 19

------

Oct Oct Oct Oct Oct Oct Oct

Jun Jun Jun Jun Jun Jun Jun

Oct Oct Oct Oct Oct Oct Oct

Jun Jun Jun Jun Jun Jun Jun

Feb Feb Feb Feb Feb Feb Feb Feb

Source: National Statistics Bureau of the PRC, Guotai Junan International. Source: National Statistics Bureau of the PRC, Guotai Junan International.

The COVID-19 pandemic may delay Café De Coral's expansion plan in the Greater Bay Area. Like more catering companies in mainland China, Café De Coral lost most revenue in February, and revenue may decline around 50% YoY in

March. But Café De Coral has recovered better than other large-scale catering companies, as it meets the needs of the

working class for food during work days via dine in or food delivery services. Food delivery has become a critical revenue Report generator for many restaurants in mainland China during the pandemic. As a leading Chinese fast food brand, Café De Coral

enjoys a favorable commission rate in the Meituan platform, which has gained it a huge advantage over small fast food

restaurants. However, Café De Coral's expansion plan in the Greater Bay Area may be delayed due to the COVID-19 Company pandemic, but Café De Coral may gain more favorable conditions for its leases. Generally, we expect that Café De Coral will

See the last page for disclaimer Page 3 of 7

cUNBsOzQxOoNsQ9P8Q8OtRoOmOqQfQrRqMjMrQrM7NpOoMxNpMwOwMpMpN [Table_PageHeader]Café de Coral (00341 HK)

continue to suffer before the COVID-19 pandemic ends.

] 1 r a M t h g i R _ e l b a T [

Earnings Forecasts Assumptions and Revisions

We have greatly revised down our estimations in FY2020-FY2021. Our earnings forecasts are based on new accounting standards. Due to the extremely severe impact of the COVID-19 pandemic, we have greatly revised down our revenue 14 April2020 forecasts for Café de Coral by 12.1% and 11.9% in FY2020 and FY2021, respectively. We have revised down the Company's FY2020 and FY2021 gross margin by 3.2 ppt and 0.9 ppt, respectively, primarily due to lower sales, more promotion activities and ongoing expenses. Overall, we have revised down earnings forecasts in FY2020 and FY2022 by 71.3% and 25.9%, respectively.

Table-1: Earnings Estimates NEW OLD CHANGE HK$ million 2020F 2021F 2022F 2020F 2021F 2022F 2020F 2021F 2022F Revenue 7,598 8,120 9,335 8,648 9,212 9,630 -12.1% -11.9% -3.1%

] 2 r a M t h g i R _ e l b a T [

Gross profit 703 943 1,222 1,077 1,150 1,201 -34.7% -18.0% 1.7% Operating profit 237 508 728 597 648 675 -60.4% -21.7% 7.8% Profit after tax 120 344 526 420 464 484 -71.4% -25.9% 8.6% Shareholder's 120 344 525 419 464 484 -71.3% -26.0% 8.5% profit EPS 0.205 0.587 0.897 0.716 0.792 0.826 -71.3% -25.9% 8.5%

Gross margin 9.3% 11.6% 13.1% 12.50% 12.50% 12.50% -3.2 ppt -0.9 ppt 0.6 ppt Operating

3.1% 6.3% 7.8% 6.90% 7.00% 7.00% -3.8 ppt -0.7 ppt 0.8 ppt margin Net margin 1.6% 4.2% 5.6% 4.80% 5.00% 5.00% -3.2 ppt -0.8 ppt 0.6 ppt Source: Guotai Junan International.

(00341 HK)

Due to worse earnings forecasts, we lower our TP to HK$18.20. The current price has reflected pessimistic sentiment

towards the Hong Kong/mainland catering industry and Café de Coral. As Café de Coral has a healthy financial position, loyal 大家乐 customer base and strong bargaining power with landlords, we expect that Café de Coral will outperform its peers in the Hong Kong market. Moreover, the Hong Kong government's Anti-epidemic Fund will provide Café de Coral subsidies to counter the pandemic. Each catering outlet can receive subsidies of between HK$250,000 and HK$2.2 million based on the size of

premises. The subsidy will be disbursed in two tranches, and not less than 80% of the subsidy has to be used to pay de CoralCafé employees' salaries. Café de Coral will survive until the pandemic ends, and then will enjoy dividends from the industry reshuffle. Therefore, we maintain "Accumulate" but lower TP to HK$18.20, which represents 83.8x FY2020 PER, 29.3x

FY2021 PER and 19.2x FY2022 PER.

Report

Company

See the last page for disclaimer Page 4 of 7 [Table_PageHeader]Café de Coral (00341 HK)

Table-2: Peers Comparison

] 1 r a M t h g i R _ e l b a T [

PER Operating PBR ROE Gross Market (x) Margin Share (x) (%) Margin (%)* Company Ticker $ Cap (%) Price (HK$ mn)

2019 2020 2021 2022 2020 2020 2020 2020 14 April2020 HK - Listed companies Café De Coral 341 HK HKD 15.720 9,207 73.1 25.6 16.7 n.a. 2.7 11.2 11.6 6.3 Haidilao International 6862 HK HKD 31.300 165,890 62.7 77.7 34.2 26.3 12.3 16.8 58.2 7.7 Holdings Ltd Tai Hing Group 6811 HK HKD 1.370 1,370 15.8 12.5 9.1 7.2 2.6 12.0 71.5 5.5 Holdi Xiabuxiabu Catering 520 HK HKD 7.030 7,603 22.9 34.6 12.5 10.6 2.7 9.6 62.6 5.2 Holdings Ltd Fairwood Holdings Ltd 52 HK HKD 18.740 2,427 11.0 15.9 14.0 n.a. 3.0 19.4 n.a. n.a. Manageme Ajisen China Holdings 538 HK HKD 1.800 1,965 11.3 9.0 n.a. n.a. n.a. 5.2 n.a. 3.9 Simple Average 32.8 29.2 17.3 14.7 4.7 12.4 51.0 5.7 Ltd Weighted Average 60.1 71.4 31.7 23.6 11.1 16.1 54.8 7.4

China - Listed companies

] 2 r a M t h g i R _ e l b a T [

China Quanjude 002186 CH CNY 9.290 3,146 64.2 32.0 30.0 n.a. n.a. n.a. n.a. n.a. Guangzhou 603043 CH CNY 29.070 12,892 28.1 24.3 20.0 14.7 4.5 18.1 52.5 15.2 Group Co Lt-A 46.2 28.2 25.0 14.7 4.5 18.1 52.5 15.2 RestaurantSimple Average Group -A Weighted Average 35.2 25.8 21.9 11.8 3.6 14.6 42.2 12.2

USA - Listed companies Mcdonald'S Corp MCD US USD 180.120 1,038,0 22.7 27.8 21.5 20.1 (13.6) (57.1) 27.9 41.7 Starbucks Corp SBUX US USD 71.760 652,834 24.3 40.7 24.7 22.0 (11.0) (36.1) 67.8 11.9 42 Restaurant Brands QSR US USD 41.920 151,256 17.5 18.6 14.6 13.4 5.7 22.1 19.2 35.7 Yum! Brands Inc YUM US USD 77.060 179,728 18.2 24.0 19.4 18.7 (3.2) (10.6) n.a. 33.5 Intern Chipotle Mexican Grill CMG US USD 744.080 160,380 59.0 81.5 38.9 29.7 8.1 13.0 17.8 6.0

IncSimple Average 28.3 38.5 23.8 20.8 (2.8) (13.7) 33.1 25.7

Weighted Average 25.1 34.7 23.1 20.8 (9.0) 0.5 36.2 29.0 (00341 HK)

Source: Bloomberg. Note: 1. * is outlier which is excluded from valuation. 2. For those companies with financial year ended other than 12/31, their PER and PBR are adjusted to calendar year and ROE, GM as well as OM of FY21

are shown in 2020 in table for comparison. 大家乐 3. Different companies have various methods to calculate gross margin.

Figure-5: PER Band of Café De Coral Figure-6: PBR Change and Stock Price Change

Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Jul-18 Jul-19 Stock Price Change de CoralCafé 30 30.0% Forward PER Change 20.0% 25 (x) 10.0% 20

0.0%

15 17 18 20 16 19

15 16 17 19 18

15 15 16 16 18 18 19 17 17 19 20

------

- - - - -

------15 -

-10.0%

Jul Jul Jul Jul Jul

Apr Oct Apr Oct Apr Oct Apr Apr Oct Oct Apr

Jan Jan Jan Jan Jan Jan 10 -20.0%

5 -30.0%

0 -40.0% Cafe de Coral -50.0% PER (historical) PER (current) PER (high) PER (low) PER band -60.0%

Source: Bloomberg, Guotai Junan International. Source: Bloomberg, Guotai Junan International.

Report

Company

See the last page for disclaimer Page 5 of 7 [Table_PageHeader]Café de Coral (00341 HK)

Financial Statements and Ratios

[Table_IncomeStatement] [Table_BalanceSheet] ] 1 r a M t h g i R _ e l b a T [

Income Statement Balance Sheet

Year end 31 Mar (HKD m) 2018A 2019A 2020F 2021F 2022F Year end 31 Mar (HKD m) 2018A 2019A 2020F 2021F 2022F

Total Revenue 8,427 8,494 7,598 8,120 9,335 Property, plant and equipment 2,021 1,532 1,457 1,446 1,432

Cost of sales (7,385) (7,357) (6,894) (7,177) (8,113) Investment properties 663 628 628 628 628

Others 558 3,501 3,504 3,511 3,520

Gross profit 1,042 1,137 703 943 1,222 Total Non-current Assets 3,242 5,662 5,590 5,585 5,580 14 April2020

Other gains, net (14) 18 15 15 14

Administrative expenses (459) (448) (482) (450) (509) Cash & Cash Equivalents 801 836 669 897 1,187

Inventories 234 241 300 234 329 Operating Profit 570 707 237 508 728 Bills receivable 191 165 126 141 166 Finance cost, net 12 15 (90) (89) (88) Others 147 61 58 55 52

Share of profit of associates 0 0 0 0 0 Total Current Assets 1,374 1,303 1,153 1,326 1,734

Total Assets 4,616 6,965 6,743 6,911 7,314

Profit Before Tax 581 722 147 418 639

Income Tax (122) (130) (26) (74) (114) Trade payables 207 220 226 250 297

Accrued expenses and other

Profit after Tax 459 592 120 344 526 payables 707 648 668 634 603

Non-controlling Interest (1) (2) (0) (0) (1) Others 41 813 818 742 812

] 2 r a M t h g i R _ e l b a T [ Shareholders' Profit / Loss 458 590 120 344 525 Total Current Liabilities 956 1,681 1,711 1,627 1,711

Basic EPS 0.790 1.017 0.205 0.587 0.897 Net current asset 419 (378) (558) (301) 23 Total assets less current liabilities 3,661 5,284 5,032 5,285 5,603

[Table_CashFlowStatement]Cash Flow Statement

Deferred revenue 34 28 29 30 32

Year end 31 Mar (HKD m) 2018A 2019A 2020F 2021F 2022F Others 54 2,076 2,102 2,129 2,157

PBT 581 722 147 418 639 Total Non-current Liabilities 87 2,104 2,131 2,160 2,189

DD&A 341 352 325 319 322 Total Liabilities 1,043 3,785 3,842 3,786 3,900

Change in working capital 36 23 15 53 (95)

Others 38 (30) 20 (69) 78 Share capital 59 59 59 59 59

Cash generated from operations 995 1,068 507 721 944 Reserves 3,511 3,116 2,837 3,061 3,349

Income and interest tax paid (103) (116) (32) (74) (116) Total Shareholders' Equity 3,570 3,175 2,895 3,119 3,408

Minority Interest 4 5 5 6 6 (00341 HK) Cash from Operating Activities 893 952 475 647 828

Total Equity 3,574 3,180 2,900 3,125 3,414

Investing activities 大家乐

Capital expenditure (450) (293) (260) (318) (318) [Table_FinancialRatio] Others (7) 95 12 12 11 Financial Ratios

Cash from Investing Activities (457) (199) (248) (306) (307) 2018A 2019A 2020F 2021F 2022F

Revenue growth (%) 6.7 0.8 -10.6 6.9 15.0 Café de CoralCafé Financing activities Gross profit growth (%) -1.4 9.1 -38.1 34.0 29.6 Net proceeds from issue of shares 8 0 0 0 0 Operating profit growth (%) -5.6 24.1 -66.5 114.5 43.4

Purchase of shares (3) (11) (2) (2) (2) Net profit growth (%) -9.1 28.9 -79.6 185.9 52.8

Dividend paid (471) (680) (392) (111) (228)

Cash from Financing Activities (466) (691) (394) (113) (231) Gross margin (%) 12.4 13.4 9.3 11.6 13.1

Operating margin %) 6.8 8.3 3.1 6.3 7.8

Net Changes in Cash (30) 63 (167) 228 291 PAT margin (%) 5.5 7.0 1.6 4.2 5.6

Foreign exchange effect 41 (29) 0 0 0 Net margin (%) 5.4 6.9 1.6 4.2 5.6

Cash at Beg of Year 790 801 836 669 897 ROE (%) 13.0 17.5 4.0 11.4 16.1

Cash at End of Year 801 836 669 897 1,187 ROA (%) 10.1 11.0 1.8 5.0 7.4

Source: the Company, Guotai Junan International.

Inventory turnover days 21.0 21.0 21.0 21.0 21.0

Account receivable days 5.0 5.0 5.0 5.0 5.0

Account payable days 20.0 20.0 20.0 20.0 20.0

Working Turnover Days 6.9 8.4 9.3 7.3 6.3

Net gearing (%) Net Net Net Net Net

Cash Cash Cash Cash Cash

Report

Payout ratio (%) 148.3 83.3 92.6 66.5 65.8

Company

See the last page for disclaimer Page 6 of 7 [Table_PageHeader]Café de Coral (00341 HK)

Company[Table_CompanyRatingDefinition] Rating Definition

The Benchmark: Hong Kong Hang Seng Index ] 1 r a M t h g i R _ e l b a T [

Time Horizon: 6 to 18 months

Rating Definition

Buy 买入 Relative Performance>15%; or the fundamental outlook of the company or sector is favorable. Accumulate 收集 Relative Performance is 5% to 15%;

or the fundamental outlook of the company or sector is favorable. 14 April2020 Neutral 中性 Relative Performance is -5% to 5%; or the fundamental outlook of the company or sector is neutral. Reduce 减持 Relative Performance is -5% to -15%; or the fundamental outlook of the company or sector is unfavorable.

Sell 卖出 Relative Performance <-15%; or the fundamental outlook of the company or sector is unfavorable.

Sector[Table_ RatingIndustry DefinitionRatingDefinition] The Benchmark: Hong Kong Hang Seng Index Time Horizon: 6 to 18 months Rating Definition Outperform 跑赢大市 Relative Performance>5%;

] 2 r a M t h g i R _ e l b a T [ or the fundamental outlook of the sector is favorable. Neutral 中性 Relative Performance is -5% to 5%; or the fundamental outlook of the sector is neutral. Underperform 跑输大市 Relative Performance<-5%; Or the fundamental outlook of the sector is unfavorable.

[Table_DISCLOSUREOFINTERESTS]DISCLOSURE OF INTERESTS (1) The Analysts and their associates do not serve as an officer of the issuer mentioned in this Research Report. (2) The Analysts and their associates do not have any financial interests in relation to the issuer mentioned in this Research Report.

(3) Except for GUOTAI JUNAN I (01788 HK),JINSHANG BANK (02558 HK),ZHONGLIANG HLDG (02772 HK),BINHAI INVESTMENT

(02886 HK),HAITIAN ANTENNA (08227 HK),Guotai Junan and its group companies do not hold equal to or more than 1% of the market capitalization of the issuer mentioned in this Research Report. (4) Guotai Junan and its group companies have not had investment banking relationships with the issuer mentioned in this Research

Report within the preceding 12 months. (00341 HK)

(5) Guotai Junan and its group companies are not making a market in the securities in respect of the issuer mentioned in this Research Report. (6) Guotai Junan and its group companies have not employed an individual serving as an officer of the issuer mentioned in this Research Report. There is no officer of the issuer mentioned in this Research Report associated with Guotai Junan and its group companies. 大家乐

DISCLAIMER de CoralCafé This Research Report does not constitute an invitation or offer to acquire, purchase or subscribe for securities by Guotai Junan Securities (Hong Kong) Limited ("Guotai Junan"). Guotai Junan and its group companies may do business that relates to companies covered in research reports, including investment banking, investment services, etc. (for example, the placing agent, lead manager, sponsor, underwriter or invest proprietarily).

Any opinions expressed in this report may differ or be contrary to opinions or investment strategies expressed orally or in written form by sales persons, dealers and other professional executives of Guotai Junan group of companies. Any opinions expressed in this report may differ or be contrary to opinions or investment decisions made by the asset management and investment banking groups of Guotai Junan.

Though best effort has been made to ensure the accuracy of the information and data contained in this Research Report, Guotai Junan does not guarantee the accuracy and completeness of the information and data herein. This Research Report may contain some forward-looking estimates and forecasts derived from the assumptions of the future political and economic conditions with inherently unpredictable and mutable situation, so uncertainty may contain. Investors should understand and comprehend the investment objectives and its related risks, and where necessary consult their own financial advisers prior to any investment decision.

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