China Galaxy Securities has released a research report expressing optimism about the investment opportunities arising from new development trends in the snack retail industry. Downstream, the sector is transitioning from a land-grab phase to a stage of high-quality growth, with the top two players driving sustained revenue growth and improved profitability through various initiatives. Upstream, as downstream stores expand into new categories such as dairy, baked goods, and frozen foods, relevant upstream supply chain companies are poised to benefit. Furthermore, as downstream stores increasingly boost their proportion of private label products, supply chain firms with strong product R&D capabilities and customized service abilities are expected to gain market share.
Ming Ming Is Very Busy's listing on the Hong Kong stock exchange has heightened investment attention towards the sector. The company plans to list on the Hong Kong Stock Exchange on January 28, becoming the first "volume snack retail stock" in Hong Kong. The global offering comprises 14.1 million shares (approximately 7% of the total), with expected net proceeds exceeding HKD 3 billion and an issuance market capitalization of around HKD 50 billion. Current market feedback is positive, with eight cornerstone investors collectively subscribing for HKD 1.5 billion (including Tencent, Temasek, and BlackRock), and the latest subscription multiple during the offering phase exceeding 1,500 times.
As a leading enterprise in the snack retail sector, Ming Ming Is Very Busy's successful listing is expected to sustainably boost market attention towards the snack sector in the long term. The firm maintains a long-term positive outlook on investment opportunities within the snack retail industry chain and believes the industry has now entered a new phase of development. It recommends actively focusing on the investment opportunities presented by two major new trends upstream and downstream.
Downstream: Transitioning from Land-Grab to High-Quality Growth, Revenue Growth Remains Sustainable & Profitability Improves. Traditional store formats still have significant room for expansion, with traditional snack retail stores projected to approach 50,000 by 2025. The total potential store count is estimated to be around 74,000 (an incremental increase of over 20,000 stores), but a balance must be struck between store quantity and per-store revenue. Profitability is expected to continue improving. Ming Ming Is Very Busy's adjusted net profit margin increased from 2.3% to 3.9% between the first three quarters of 2023 and 2025, while Wan Chen's net profit margin rose from -1.6% to 4.4%. This is primarily attributed to narrowing store opening subsidies and adjustments to the product category structure. The firm believes these two key drivers will remain sustainable into 2026.
New store formats support store expansion and per-store improvement. Both Ming Ming Is Very Busy and Wan Chen launched new discount supermarket store formats in 2025, expanding into categories like baked goods, frozen foods, and daily chemicals. Currently, these new formats are estimated to account for less than 20% of the total store count. Drawing a comparison with Don Quijote, where new formats constitute about 50% of stores, the firm judges that there remains room for expansion of new store formats in 2026. Developing private label products boosts revenue and gross margin. The two leading players are currently developing private label products including customized goods and own-brand items. The revenue contribution from their own brands is estimated to be in the single-digit percentage range, indicating significant potential for increase when benchmarked against Don Quijote and the domestic player "Pang Shan He," which have private label contributions of 20-30%.
Upstream: Downstream Category Expansion and Cultivation of Private Label Products - Bullish on Investment Opportunities for Related Supply Chain Enterprises. Direction One: As downstream stores expand their categories into dairy, baked goods, and frozen foods, upstream supply chain companies in these related industries are likely to benefit. This is particularly true for some mid-tier brands whose revenues show considerable elasticity, examples include beverages (Xiang Piao Piao, Huan Le Jia, Li Zi Yuan, etc.), dairy (Xin Ru Ye, Yi Ming Food, etc.), baked goods (Li Gao Food, etc.), and frozen foods (San Quan Food, Qian Wei Yang Chu, etc.). Direction Two: The vigorous development of private label products by downstream players may lead to a reshuffling of market share among supply chain companies. As downstream stores intensify their development of private label goods, the firm believes the cooperative relationship between upstream and downstream has evolved from simple trade cooperation to deep product collaboration. Consequently, manufacturers possessing strong product R&D capabilities and customized service abilities are expected to achieve increased market share. Examples include snack companies (Yan Jin Pu Zi, Weilong Delicious Food, Jin Zai Food, Gan Yuan Food, You You Food), dairy products (Xin Ru Ye), and baked goods (Li Gao Food).
Risk warnings include potential risks associated with new store format expansion falling short of expectations, intensified competition in traditional stores, heightened competition among upstream enterprises, and risks related to food safety issues.
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