Beijing Xiangeqing sheds 5%

By Li Qiaoyi Source:Global Times Published: 2013-3-4 23:38:01

Shares of Beijing Xiangeqing Co, a high-end catering firm, continued to slump Monday following a restructuring announcement last week by the company's founder, who pledged an all-around overhaul to move away from the high-end catering business as a way to survive the central government's call for austerity.

Shares of the Shenzhen-listed company tumbled 5.11 percent from the previous trading day to close at 8.72 yuan ($1.40) Monday, the fifth consecutive decline since Meng Kai, Xiangeqing's founder and chairman, said February 26 in Beijing that his company will bid farewell to the high-end catering segment and instead break into the mass market.

Institutional catering and fast food businesses will be prioritized during the transition, according to Meng, who made the declaration at a time when the luxury restaurant business has suffered in the wake of the central government's calls for frugality and anti-corruption.

During 2012, Xiange­qing raked in net profits worth 120.46 million yuan, up 29.35 percent from a year earlier, according to the company's financial disclosure on Wednesday. But in the final quarter of the year, since the central government highlighted policies to curb extravagant spending, the company's net profits were only slightly more than 10 million yuan, shrinking 41.6 percent year-on-year.

Xiangeqing is one of the only three A-share listed catering firms in China. The other two, China Quanjude Group Co and Xi'an Catering Co, both of which target the high-end catering market, have also suffered volatility amid the central government's austerity push.

Shares of Quanjude and Xi'an Catering, both listed in Shenzhen, fell by 4.17 percent and 4.31 percent respectively on Monday compared to Friday.

"The nation's high-end catering market will be heavily impacted this year if the effects of frugality policies are extended throughout the year," Tian Guangli, chief consultant with Beijing-based Longce Think Tank, told the Global Times Monday.

Tian said business revenue in the high-end catering sector is likely to be halved this year by the central government's austerity calls, as government departments and agencies and State-owned enterprises are believed to contribute to a majority of consumption in the sector.

Jia Liguo, an industry analyst with Shanxi Securities in Beijing, told the Global Times that prospects for catering companies that are preparing for IPOs might also be dimmed by the overall market climate, especially if they mainly target the high-end segment.

The latest official purchasing managers index of the non-manufacturing sectors Sunday mirrored the dampened market sentiment. The sub-index measuring new orders in the catering sector signaled continued contraction, while the catering business activity expectation sub-index fell to 42.3 percent in February, hitting a record low.

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