DFI Retail: More focused portfolio with margin turnaround; new Buy

Research evidence excerpt

DFI Retail: More focused portfolio with margin turnaround; new Buy

Investment Thesis

We initiate on DFI Retail with Buy with PO US$4.80. Headquartered in HK, DFI Retail

Group is a pan-Asian multi-format retailer with operations across HK, China and ASEAN.

The group manages a diversified portfolio spanning Convenience Stores (7-Eleven),

Health & Beauty (Mannings and Guardian), Home Furnishings (IKEA), and Food retail

(Wellcome, Lucky). DFI operates through a mix of directly owned retail banners and

master franchise arrangements, giving it exposure to both staple grocery demand and

higher-margin discretionary categories. The group also owns a 50% stake in Maxim’s

Caterers, a privately held Hong Kong-based restaurant operator with a broad portfolio

across quick-service restaurants, casual dining, bakeries and catering.

Our Buy rating is premised on: 1) our above-consensus forecasts which see DFI beating

even the high-end of its 3-year profit target (2028E) supported mainly by our positive

views on CVS and H&B segments; 2) sharpened governance framework with mgmt.

incentive tied to TSR targets; and 3) undemanding valuation (14x 2027E P/E) given

margin expansion trajectory.

Just at the beginning of multi-year margin recovery

DFI’s NPM contracted from 4.2% in 2016 to a trough of -2.8% in 2024 dragged by

weaker food and associate exposures. NPM recovered to 2.6% in 2025 upon structural

exit of dilutive exposures and repaired the balance sheet. We believe the company is at

the beginning of multi-year recovery and see upside from self-help measures, including

tighter execution, better mix, stronger sourcing, and disciplined digital monetisation.

BofA is 7-17% above consensus on 26/27/28E profit

Company announced 3-year targets at 2025 Investor Day in December: 2–3% organic