Analysts Meghana Kande and Lim Siew Khee have upgraded their call on Sheng Siong to “buy” from “hold” with a higher target price of $2.97 from $2.40 previously, on better visibility of its store opening pipeline and stronger gross margin expansion from its enlarged network.
The analysts are upbeat on the results being in line with expectations. They specifically noted that FY2025 gross margins improved by 80 basis points y-o-y to 31.3%, the strongest y-o-y rise since 2021 due to economies of scale from its larger store network and better sales mix.
Operating margin however, stayed flat y-o-y at 11.2% on higher staff costs. Sheng Siong ended 2025 with 12 new stores, compared to the analysts’ expected 11 due to the late-Dec 2025 opening of an outlet in Jurong West, which was previously a different grocery provision store.
“We think Sheng Siong can improve gross margin by 50 basis points per annum over FY2026F-FY2027 on operational efficiencies and better procurement, which should mitigate the impact of higher staff costs, in our view,” say Kande and Lim.
See also: Another strong year expected for Sheng Siong
Beyond one confirmed store opening in 3QFY2026, Sheng Siong identified nine tenders with Housing and Development Board (HDB) for FY2026.
In its FY2025 analyst briefing, management also highlighted interest in exploring more opportunities with private mall operators, expanding its new store pipeline beyond HDB tenders. Of its 12 new stores opened last year, three were located in private malls. Management shared that rents were secured at favourable terms despite the premium locations.
Accordingly, Kande and Lim raise their new store forecasts for FY2026/FY2027 to nine/seven units from six/five units previously. “We expect full-year contribution from stores opened in 2025 and new stores in 2026 to support sales growth in FY2026, even if Sheng Siong may normalise to about 1% on lower value of consumption vouchers from the Singapore government, as announced in Budget 2026,” say the analysts.
As at 12.00pm shares in Sheng Siong are trading at $2.61.
