Investment Rating - The report maintains a "Hold" rating for the company with a target price of HKD 1.15 per share, indicating a potential upside of 17.3% from the current price of HKD 0.98 [6][17]. Core Insights - The company has experienced significant operational pressure in recent years, but it has managed to reduce losses substantially in the first half of 2025, with a net loss of HKD 0.84 billion compared to HKD 2.72 billion in the same period last year. This improvement is attributed to lower raw material costs and reduced asset impairment losses [8][6]. - The company has initiated an internal partnership system aimed at stabilizing and expanding its store network, with plans to add 60 partnership stores by the end of 2026. Currently, there are 763 stores under the main brand, with a slight increase in the number of stores compared to the end of 2024 [4][11]. - The "Couch" brand is under significant pressure, currently in a phase of store closures, with a total of 174 stores as of the first half of 2025. The brand's same-store sales have declined by 14.0% [5][12]. Summary by Sections Financial Performance - For the first half of 2025, the company reported total revenue of HKD 19.42 billion, a year-on-year decrease of 18.88%. The main brand contributed HKD 11.35 billion, down 13.5%, while the "Couch" brand generated HKD 7.45 billion, down 25.8% [8][6]. - The company expects net profits for 2025 to be -HKD 2.42 billion, improving to -HKD 0.21 billion in 2026, and turning positive with HKD 0.11 billion in 2027 [6][17]. Store Network and Strategy - As of the first half of 2025, the company operates 763 stores, with a breakdown of 42.6% in first-tier cities, 41.0% in second-tier cities, and 16.0% in lower-tier cities. The store count has stabilized, with a net increase of 3 stores compared to the end of 2024 [4][10]. - The company has implemented a "dual-point" model for the "Couch" brand, which has shown promising results, with a 49% increase in performance compared to traditional stores [12][5]. Cost Management - The company has seen a reduction in raw material costs by 22.5% to HKD 6.41 billion, contributing to an improved cost-to-revenue ratio of 33.02% [8][6]. - Employee costs have decreased by 18.1% to HKD 6.67 billion, with a reduction in workforce from 24,606 to 17,930 employees [8][6].

Core Viewpoint - Huaxing Securities maintains a "Hold" rating on Xia Bo Xia Bo (00520) with a target price of HKD 1.00, corresponding to 0.2 times the 2026 P/S ratio [1] Revenue Forecast - The company is expected to see revenue changes from 2025 to 2027 with a decline of 15.0% in 2025, followed by growth of 3.0% in 2026 and 2.0% in 2027, reaching revenues of CNY 40.4 billion, CNY 41.6 billion, and CNY 42.5 billion respectively [1] Net Profit/Loss Projections - The forecast indicates net losses attributable to shareholders of CNY 145 million in 2025 and CNY 66 million in 2026, with a projected net profit of approximately CNY 240 million in 2027 [1] Store Count Analysis - The number of Xia Bo Xia Bo stores peaked at 1,061 in 2020 and has been in decline, expected to bottom out at 760 stores in 2024. As of the first half of 2025, the store count has slightly increased to 763 [1] - If the store count continues to increase or stabilizes at the first half of 2025 level, it may indicate that a phase of adjustment has been completed, warranting attention to the company's future development [1] Coucou Brand Performance - The Coucou brand reached a peak of 257 stores in 2023 but has since begun to decline, with store numbers expected to drop to 197 in 2024 and further to 174 in the first half of 2025 [1] - The analysis suggests that the Coucou brand's store count has not yet bottomed out, and its future development should be monitored [1] Investment Opportunities - Historically, when the company's fundamentals have bottomed out, the likelihood of marginal improvement is significantly higher than the risk of continued decline, indicating potential investment opportunities as the Coucou brand stabilizes and recovers [1]