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Investing.com - Goldman Sachs downgraded Songcheng Performance Development Co Ltd. (SZ:300144) from Buy to Sell, while lowering its price target to RMB7.50 from RMB11.00 following disappointing third-quarter results.
The tourism company reported a 23% year-over-year decline in net profit to RMB354 million for the third quarter of 2025, falling below both Goldman Sachs and market expectations. Revenue continued to show weakness, declining 10% year-over-year, though this marked an improvement from the 16% drop seen in the second quarter.
The downgrade reflects ongoing challenges in key tourism destinations including Sanya, Lijiang, and Zhangjiajie, along with temporary impacts from Chikungunya fever on the company’s Foshan project. These negative factors were partially offset by improved performance from Songcheng’s Shanghai operations.
Goldman Sachs reduced its earnings per share estimates for fiscal years 2025-2027 by 10-12% and now projects a slower recurring EBIT compound annual growth rate of 10% from RMB0.9 billion in FY2025 to RMB1.1 billion in FY2027, excluding one-off design service fee contributions from asset-light projects.
The new price target implies a 7% downside potential, which Goldman Sachs noted represents "one of the least upside within our Asia travel coverage universe" compared to others in the sector that show potential gains ranging from 1% to 46%.
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