$Luckin Coffee Inc.(LKNCY)$ , $Luckin Coffee Inc.(LK)$
Source from Ping An of China Securities.
1. Why did $Luckin Coffee Inc.(LKNCY)$ achieve a headwind comeback in 2022? What is the governance structure of the company today?
After the financial storm incident, $Luckin Coffee Inc.(LKNCY)$has successively completed the resolution of internal and external problems (bankruptcy reorganization, investor compensation, change of control, etc.), superimposed the outbreak of the product end and continued to expand stores, and realized the realization of the pandemic situation in 2022.
Turned against the wind, 22Q1-Q3 achieved revenue of RMB 9.598 billion (yoy+73.5%); realized adjusted net profit attributable to the parent company of RMB882 million (excluding adjustments such as equity incentives and class actions). At present, $Luckin Coffee Inc.(LKNCY)$ has formed an excellent board of directors and management team, completed the separation from historical problems, and realized high-quality store operations. The operating profit margin of 22Q2/Q3 self-operated stores reached 30.6%/29.2% respectively.
2. How do you view the current competitive landscape in the coffee market? How do you view the difference between coffee and freshly made tea tracks?
The coffee track market is large and still in the stage of development, and the industry still has a high degree of tolerance; through sorting out the current major players, it is found that there are often group support behind the big store model, and most of the small store models are local brands.
Compared with coffee, drinking is an industry with higher supply and demand thresholds (coffee consumption needs to be cultivated, so the slope of store demand is flat and showing a steady upward trend, so the climbing cycle of coffee stores is longer, and the UE cost of a single store is higher. higher requirements), so the competitive landscape of the coffee industry may not be as dispersed as that of tea drinking. Leading companies have already gained advantages in terms of brand, management, scale, and preemption. It is believe that the pattern of "the strong will always be strong" is expected to continue .
3. How do you view$Luckin Coffee Inc.(LKNCY)$’s new product iteration? What are Luckin’s current strengths and barriers? Can capital support a new sound level brand?
$Luckin Coffee Inc.(LKNCY)$’s hot style promotion is not a temporary “Internet celebrity” style, but continuous. The logic behind it mainly lies in: 1) grasping the underlying product logic of “big latte”; 2) forming a system , process-based, and digital R&D mechanisms, and internalize them into sustainable innovation capabilities.
$Luckin Coffee Inc.(LKNCY)$'s product taste and price are highly universal, and the channel side first ran out of 8000+ stores. Excellent management and operation capabilities and a complete supply chain are its advantages & barriers. Coffee is a slow business with high supply and demand thresholds. At present, the market supply is extremely rich and the advantages have been taken. It is difficult to reproduce the store expansion environment allowed by the bonus period of the Luckin era, unless there is a very high degree of product differentiation+ Very strong operational capabilities, otherwise capital will support a new sound level brand "there is little hope".
4. $Luckin Coffee Inc.(LKNCY)$'sfuture development space?
$Luckin Coffee Inc.(LKNCY)$'s current average monthly transaction users are only 25.1 million, benchmarking around 50 million college graduates/180 million white-collar workers within 5 years, with great penetration potential, and overseas development will bring greater imagination; at the same time, Luckin’s brand power is gradually revealed , its own APP traffic sources accounted for as high as 52.4% (July 2022), and has become a scarce national mass consumer chain brand, with a promising future.
Risks reminder:
1) The board transfer is less than expected;
2) Policy risk;
3) Changes in management;
4) Intensified competition is inevitable, and some competitors are expanding wildly;
5) Food safety risks; Store less than expected risk.
Source from: Smartkarma
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