Huaan Securities Initiates Coverage on GUOQUAN (02517) with "Buy" Rating, Sees Potential in Lower-Tier Markets

Stock News12-10

Huaan Securities has initiated coverage on GUOQUAN (02517) with a "Buy" rating, citing the company's short-term outlook for 2026. The report highlights that scenario expansion and a focus on lower-tier markets will serve as effective investment catalysts. By emphasizing cost-effective bestsellers and targeting lower-tier cities, GUOQUAN is expected to return to a growth trajectory in the second half of 2024. The brokerage believes the company is entering its second growth cycle.

Key insights from Huaan Securities include: 1. **Revenue Growth**: - Store expansion will primarily come from lower-tier markets, with limited growth expected in higher-tier cities (focus on existing stores). - Store efficiency improvements will stem from higher average spending and repeat customer rates, driving same-store sales growth. - Competitive advantages include a superior single-store model (outperforming in townships compared to higher-tier cities and snack retailers) and differentiated positioning (specialized competition against food suppliers/retailers). - Steady-state projections suggest 17,000 stores in lower-tier markets (1.7x current levels) and 23,000 total stores (1.1x current levels), with GMV reaching ¥14.1 billion and ¥23.3 billion, respectively.

2. **Profit Growth**: - From 2025, GUOQUAN is expected to accelerate profitability, with significant margin expansion potential compared to similar chain businesses. - Key profit drivers include supply chain cost reductions, mature marketing models, and economies of scale, with long-term net profit margins potentially reaching 10%. - Supply chain optimization could contribute 3-5 percentage points, while marketing efficiency and scale effects may add 4-6 percentage points.

**Investment Recommendation**: Huaan Securities forecasts 2025-2027 revenue of ¥7.62 billion, ¥8.97 billion, and ¥10.47 billion (YoY growth of +17.7%, +17.8%, +16.7%), with net profits of ¥430 million, ¥580 million, and ¥740 million (YoY growth of +85.5%, +34.9%, +28.3%). The corresponding P/E ratios are 19x, 14x, and 11x.

**Risks**: Store expansion/same-store sales pressure, category expansion, competition, capacity expansion, and food safety concerns.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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