(Yicai Global) Jan. 12 – Zhou Hei Ya International Holdings has brushed aside rumors that the Chinese braised duck snack chain is struggling after investor concerns about profitability and leadership drove down its stock price by 23 percent yesterday.

Business continues as normal, the senior management team is stable and Zhou Hei Ya aims to achieve profit of CNY200 million (USD29.6 million) this year, the Changsha, central Hubei province-based firm said today.

Zhou Hei Ya’s share price [HKG:1458] closed down 5.7 percent at HKD4.24 (USD0.54) today, giving it a market valuation of HKD9.8 billion (USD1.2 billion).

Zhou Hei Ya is expecting net profit to as much as halve in 2022 from the previous year, to between CNY150 million (USD22.2 million) and CNY200 million from CNY342 million in 2021, according to a rumor circulating yesterday.

Investors were also concerned about the composition of the senior management team and that the controlling stakeholder might pare its stake.

The majority shareholder has no near-term plans to sell shares, Zhu Hei Ya added.

But the firm is experiencing challenges that could affect profitability, it said. The cost of ingredients is going up and the firm is incurring high overheads as a new plant in Chengdu, southwestern Sichuan province gets ready to come online.

The braised duck chain has taken a battering due to the impact of Covid-19. In the first half, Zhou Hei Ya’s net profit plunged 92 percent year on year to CNY18.4 million (USD2.7 million) while revenue slumped 19 percent to CNY1.2 billion (USD177.5 million).

Consumer sentiment was sluggish amid the Covid-19 flare-ups and weak economic recovery, Zhou Hei Ya said in its interim report released earlier this year. Bulk commodity prices have surged with global inflation, impacting the company’s production and operations.

As of June 2022, Zhou Hei Ya had 3,160 stores in China, covering 297 cities in 27 provincial-level regions, according to its interim report for 2022. These include 1,342 direct-sale stores and 1,818 franchises.

Editor: Kim Taylor