Hong Kong business met headwinds. The Company's 1HFY20 revenueslightly increased by 1.6% YoY to HK$4,264 million. Cafe de Coral HongKong QSR business went up 2.2% YoY and casual dining revenue was down4.1% YoY, impacted by recent social unrest. Performance of mainlandbusiness was steady, up 3.6% YoY despite 4.5% RMB depreciation. TheCompany's gross margin decreased 1.7 ppt YoY to 11.7% in 1HFY20, as itlaunched more value meals and promotions to maintain sales and marketshare. Cafe de Coral's shareholders' profit decreased 34.5% YoY to HK$150million in 1HFY2020, in line with the profit warning.
Uncertainties remained in Hong Kong business but expansion in theGreater Bay Area is on track. Extremely challenging external environmentsignificantly affected the Hong Kong catering industry. In October andNovember, the situation became even more intense, but based on a recentsigns of calming down, Hong Kong’s catering industry is expected to slightlyimprove. Uncertainties in Hong Kong’s political situation will still affect theCompany's outlook. On the other hand, the Company will accelerateexpansion in mainland China, with 16 more restaurants scheduled to open.
Due to worse earnings forecasts, we lower out TP to HK$21.20. The currentprice has reflected pessimistic sentiment toward Cafe de Coral, but its fastfood business has proven extremely resilient under the difficult situation.
　　Therefore, we maintain "Accumulate" but lower TP to HK$21.20, whichrepresents 29.6x FY2019 PER, 26.8x FY2020 PER and 25.7x FY2021 PER.