EPS of $-0.01 increased by 27.3% from previous year
Gross margin of 20.1%
Net income of -16.43M
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Best Food Holding Company Limited (1488.HK) QQ1 2025 Results Analysis – Revenue Decline, Margin Pressure and Balance Sheet Leverage in the Chinese Restaurant Sector
Executive Summary
Best Food Holding Company Limited reported QQ1 2025 revenue of 97.73 million CNY, down 22.98% year over year and 18.69% quarter over quarter, as disclosed in the quarterly results. Gross profit was 19.68 million CNY with a gross margin of 20.14%, reflecting ongoing pricing, mix, and cost headwinds within the restaurant portfolio. Operating income stood at 11.70 million CNY, yielding an operating margin of 11.97%; however, the company posted a bottom-line loss driven by a substantial negative item in total other income/expenses of 29.49 million CNY, resulting in a net loss of 16.43 million CNY and a negative earnings per share of 0.0104 CNY. YoY, net income declined from prior quarters but improved on a per-share basis, with earnings per share of -0.0104 CNY, reflecting an ongoing deleveraging and profitability challenge in a highly levered capital structure.
Cash flow dynamics show a positive operating cash flow of 8.31 million CNY and a free cash flow of 6.32 million CNY after a capex outflow of 1.99 million CNY. The balance sheet remains heavily leveraged and structurally challenged: total assets of 772.97 million CNY versus total liabilities of 1,023.16 million CNY, and equity of -276.48 million CNY. The company carries a total debt burden of 776.35 million CNY with a net debt of 752.01 million CNY. The current ratio is a stressed 0.18x, signaling near-term liquidity risk despite positive operating cash flow, underscoring the need for balance sheet deleveraging and capital structure optimization.
Looking forward, there is no explicit forecast from management in the QQ1 release. The near-term investment thesis hinges on stabilizing and growing same-store sales, further enhancing store-level profitability, and accelerating deleveraging. Investors should monitor management’s actions on cost control, working capital optimization, potential franchising accelerants, and any strategic asset monetization plans as key catalysts for improved liquidity and earnings power over the ensuing quarters.
Total Other Income/Expenses Net: -29,487,000; Income Before Tax: -17,784,500; Income Tax Expense: 299,000
Net Income: -16,429,500; Net Income Margin: -16.81%; YoY net income change: +27.18%; QoQ: +83.30%
Financial Highlights
Key QQ1 2025 metrics (in CNY):
- Revenue: 97,726,500; YoY change: -22.98%; QoQ change: -18.69%
- Gross Profit: 19,683,500; Gross Margin: 20.14%; YoY gross profit change: -27.53%; QoQ: -37.36%
- Operating Income: 11,702,500; Operating Margin: 11.97%; YoY change: -20.20%; QoQ: -41.30%
- Total Other Income/Expenses Net: -29,487,000; Income Before Tax: -17,784,500; Income Tax Expense: 299,000
- Net Income: -16,429,500; Net Income Margin: -16.81%; YoY net income change: +27.18%; QoQ: +83.30%
- EPS: -0.0104; Weighted Avg Shares: 1,578,697,030; EPS Diluted: -0.0104;
- EBITDA: -5,284,000; EBITDARatio: -0.0541; Operating Income Margin: 11.97%
- Free Cash Flow: 6,317,499; Operating Cash Flow: 8,308,999; Capex: -1,991,500
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
97.73M
-22.98%
-18.69%
Gross Profit
19.68M
-27.53%
-37.36%
Operating Income
11.70M
-20.20%
-41.30%
Net Income
-16.43M
27.18%
83.30%
EPS
-0.01
27.27%
83.31%
Key Financial Ratios
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Earnings call transcript not provided in the supplied data. The analysis therefore does not include management quotes or call-specific highlights. If a transcript becomes available, the highlights would group insights by themes such as strategy (growth via store network and potential franchising), cost discipline (SG&A and COGS management), operations (same-store sales dynamics, mix shifts), and market conditions (regulatory and macro headwinds in China).
Transcript not provided.
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Forward Guidance
The QQ1 2025 release does not include formal forward guidance. In the absence of explicit targets, the forward view depends on three levers: (1) same-store sales growth and menu pricing, (2) cost discipline across G&A and operating expenses to improve margins, and (3) balance sheet deleveraging to restore financial flexibility. Given the leverage and liquidity stresses (current ratio of 0.18x, total debt of 776.35m CNY against assets of 772.97m CNY), management will likely emphasize deleveraging progress and cash flow optimization. Potential scenarios: Base case assumes incremental SSS improvement and modest gross margin stabilization; Bear case sees continued margin compression and slower deleveraging; Bull case requires meaningful reduction in other expenses and favorable financing terms to unlock EBITDA expansion and cash generation.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
1488.HK Focus
20.14%
N/A
N/A
N/A
1468.HK
25.60%
1.43%
0.61%
87.76%
1522.HK
39.80%
0.01%
0.10%
70.19%
1466.HK
30.30%
-11.60%
-1.54%
-77.26%
1443.HK
29.10%
11.70%
0.72%
61.25%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Given the QQ1 2025 results, the investment case hinges on deleveraging and a sustained improvement in profitability. While operating income appears positive and free cash flow generation exists, the balance sheet remains structurally fragile with negative equity and heavy short-term debt. Near-term catalysts include improved cost controls, potential franchising expansion to conserve capital, and any asset monetization that enhances liquidity. Investors should monitor the pace of deleveraging, changes in working capital efficiency, and any management-guided milestones for same-store sales growth and margin restoration. Until there is clear evidence of a durable turnaround and a strengthened balance sheet, the stock carries elevated risk within the Consumer Cyclicals/Restaurants space in HKSE.
Key Investment Factors
Growth Potential
Store rationalization and refurbishment, selective expansion in higher-traffic locations, and potential franchising acceleration could broaden the revenue base. Management could monetize non-core assets or optimize the long-term investments to generate additional liquidity. Digital ordering and delivery partnerships may lift throughput and average spend, contributing to improved unit economics if executed well.
Profitability Risk
Material risks include sustained negative equity (-276.5m CNY), high short-term leverage (708m+ CNY in short-term debt), stressed liquidity (current ratio ~0.18x), and exposure to input cost volatility and macro consumer spending in China. A large non-operating expense load (~29.5m CNY) in QQ1 indicates potential one-off impairments or extraordinary items that could reappear or recur. Dependency on external financing to fund capex and working capital could compress financial flexibility if credit conditions tighten.
Financial Position
Extremely leveraged balance sheet with total liabilities of 1.024b CNY vs total assets of 0.773b CNY, and negative equity. Positive operational cash flow (8.31m CNY) and free cash flow (~6.32m CNY) provide some liquidity, but near-term liquidity risk persists due to insufficient current assets to cover current liabilities and a heavy reliance on short-term borrowing.
SWOT Analysis
Strengths
Established restaurant network with approximately 700 stores under Best Food brands (as of latest publicly stated baseline).
Vertical integration potential through condiment manufacturing, wholesale, and catering services.
Presence in PRC and international markets provides diversification of footfall and brand exposure.
Best Food Holding Company Limited (1488.HK) QQ3 2024 Earnings Analysis: Revenue Decline, Margin Pressures, and Leverage Challenge in China's Restauran...