CICC has released a research report maintaining its current profit forecast and target price of HK$36 for Guming (01364). The firm currently trades at 12x/10x 2026/2027 P/E. At its current valuation level, both the valuation and shareholder returns are considered highly attractive. The report expresses confidence in the company's prospects for continuously increasing its market share and solidifying its competitive strength, thus maintaining an Outperform industry rating.
Key Company Developments
The company has announced the issuance of HK$1.96 billion in zero-coupon guaranteed convertible bonds. These bonds will be issued on July 2, 2026, and mature on June 30, 2027, with an issue price of 101% of the principal amount. The initial conversion price is set at HK$23.54 per share, representing a 15.5% premium over the closing price on June 23, 2026, and a 10% premium over the average price of the preceding five trading days. The bonds can be converted into up to 83,262,531 shares, accounting for approximately 3.5% of the current share capital. The net proceeds are intended for use in raw material procurement, capital structure optimization, research and development, and overseas expansion.
To facilitate hedging arrangements related to the bond issuance, the company plans to repurchase 34,000,400 shares at a price of HK$20.38 per share, representing about 1.43% of the current total share capital, for a total amount of approximately HK$693 million. The repurchased shares will be cancelled. This move aims to stabilize the share price, mitigate the dilutive impact of potential conversions, and enhance earnings per share. Concurrently, the controlling shareholders have committed not to reduce their shareholdings for 90 days from the date of the subscription agreement, only allowing shares to be provided for Delta hedging through a share lending agreement.
Simultaneous Share Buyback to Stabilize Price and Optimize Capital Structure, Enhancing Shareholder Returns
The company's strategy involves issuing overseas zero-coupon convertible bonds alongside a simultaneous share repurchase and cancellation for hedging purposes. The zero-coupon bonds feature low cash funding costs, allowing for more flexible cash usage arrangements. The simultaneous buyback and cancellation hedge against potential dilution from conversion, stabilizing the share price and improving returns for shareholders. Considering the share repurchase authorization resolution previously passed at the general meeting, which allows the company to buy back up to 10% of the total issued shares during the relevant period, it is anticipated that beyond this concurrent repurchase, the company may initiate ongoing share buybacks. This demonstrates the company's strong commitment to enhancing shareholder returns.
Year-to-Date Same-Store Performance Meets Expectations, Store Opening Pace Expected to Accelerate in Second Half
Rainy weather in April and May had a slight impact, while the effect from the food delivery base was limited. The current proportion of delivery orders is below 50%, lower than the level in the same period in previous years. Franchisee profitability and the actual collection rate remain at healthy and manageable levels. It is expected that the company's year-to-date new store openings are slightly fewer than the same period last year. This is primarily because this year's focus is on improving store quality with stricter site selection criteria, alongside a first-half emphasis on renovating stores to the more effective sixth-generation model. It is projected that the pace of new store openings will likely accelerate in the second half of the year.
Risk Factors to Consider
Key risks include intense industry competition, a potential slowdown in store expansion speed, and a decline in average store efficiency.
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