DPC DASH(1405.HK)：OUTLOOK STAYS HEALTHY AFTER POSITIVE PROFIT ALERT-格隆汇

机构：招银国际
研究员：Walter WOO

　　What is new? DPC Dash announced a positive profit alert for 1H24. For1H24, the company is now expecting that:1) sales to increase by 45%+ YoY to RMB 2.0bn, 2) net profit to be at RMB 10.0mn+ (vs RMB 8.8mn in 1H23), 3) adj. net profit to be at RMB 48mn+ (vs RMB 17.4mn losses in 1H23). Also, the company has opened 146 net new stores (12/ 134 in mature/ emerging markets) and total number has reached 914, representing 36% YoY growth.
　　Our view: Extremely solid SSSG, supported by resilient/ healthy performance in mature/ emerging markets, we do not rule out more upsides in the near future.
　　1) SSSG in 2Q24 was still a positive, which is the 28th consecutive quarter that DPC has achieved positive SSSG, highly impressive, esp. given the macro conditions. The figure was way better than many of its peers (+15% for HDL (CMBI est.), -MSD to -HSD for YUMC (CMBI est.), -18% for Tai Er, -14% for Starbucks, -21% for Luckin Coffee), 2) we do find the growth in mature/ emerging markets are resilient/ fast and healthy, because based on the prelim. numbers, the group’s sales per store could be at around 8% (hence we expect a MSD to LSD SSSG), and thanks to limited new stores for mature market, decent rebound in delivery demand, plus the improved adj. NP margin, we believe the sales per store for mature/ emerging markets could still be at 0% to LSD/ 15%+, 3) we see some potential for an upward guidance revision, on one hand, the growth of net new store openings has been accelerated (from 31% in FY23 to 36% in 1H24), which has achieved 85%+ of the FY24E target, and on the other hand, the adj. NP margin was already at 2.4%, which is ahead of the company’s FY24E guidance of 1% to 1.5%.
　　While we are highly cautious about the catering sector in 2H24E, we have no doubt that DPC can continue to outperform and deliver decent results.
　　Noted that the number of loyalty members has reached 19.4m in 1H24, increased by 78%, even faster than the 70% in FY23. Therefore, we are still LONG on DPC and also suggest investors to take advantages of the pair trade strategy here. It is trading at 1.4x FY25E P/S, still have a premium over peers’ average of 0.9x FY25E P/S, but it is totally justifiable given its rapid sales growth and solid market share gains.
　　Raise TP to HK$81.20, based on 1.7x FY25E P/S (rolled over from 2.1xFY24E). We revised up FY24E/ 25E/ 26E net profit by 249%/ 12%/ 10% to factor in the resilient SSSG (in both mature/ emerging markets) and faster- than-expected store expansion. The counter is trading at 1.4x FY25E P/S, 54% higher than peers’ average of 0.9x. But it is still attractive, in our view, given the 34% sales CAGR during FY23-26E.