20240328-招银国际-达势股份-01405.HK-Sales_beats_as_new_markets_continue_to_succeed_8页_1mb

Summary of DPC Dash (1405 HK) Analysis Report

Report Date: March 28, 2024
Analyst: Walter Woo
Company Overview: DPC Dash is a leading catering company in China, with a strong focus on value-driven growth. It operates primarily in Beijing and Shanghai but has expanded significantly into lower-tier cities through its franchise model. The company general good taste Ltd. holds 33.5% stake, with free float of 15.0 million shares as of March 2024.

Key Recommendations:

• BUY: Maintained with a target price of HK$73.05 (upside of 25.2% from current price of HK$53.50).
• Earnings Projection: Revised FY24E/25E sales upward by 9%/7% to factor in robust same-store same-day sales (SSSG) growth in new markets. Net profit margin expected to improve to 1.3% for FY24E, driven by economies of scale and better operating leverage.

Analysis Highlights:

• FY23 Performance: Sales grew by 51% YoY to RMB 3.1 billion, beating analyst estimates by 5%. Gross profit margin was 72.6%, but higher staff costs affected net margins.
• New Growth Markets: Drives strong SSSG performance; stores in cities like Xi'an and Changsha achieved first-month sales exceeding RMB 5 million. Delivery market share remains low at 42%, supporting future SSSG growth.
• Store Expansion: Targeted 240 new stores for FY24E (consistent with prior guidance) and projected 300-350 for FY25E-26E, indicating aggressive expansion in underserved markets. Sales growth per store is expected at 3-5% in high-tier cities versus higher rates in new cities.
• Margin Outlook: Adjusted net profit margin projected to reach 1.3% for FY24E due to cost efficiencies, despite challenges from new central kitchens. Gross margin stable at 72.6%.

Valuation:

• Target Price: HK$73.05 based on a 2.1x FY24E price-to-sales multiple, lower than the consensus due to sector de-rating.
• DCF Model: Confirms valuation of HK$73.14, implying a reasonable 28% upside from the current price.
• Peer Comparison: Market cap of HK$6.968 billion; trades at 1.5x FY24E P/S, higher than sector average of 1.3x, but attractive given 32% sales CAGR for FY23-26E. Valuation metrics include high P/E (416.5x) and low dividend yield.

Financial Ratios and Growth:

• Growth Projections: Revenue forecast to compound annually at 28.9% through FY26E. Profitability improved with negative net margins in FY22-23 turning positive (FY24E net profit of CNY 15 million).
• Risk Factors: Seasonality impacts sales in high-tier cities; high base from FY23 performance may pressure SSSG growth in FY24E.

Overall Conclusion: DPC Dash is recommended due to its resilient margin improvements, strong new market penetration, and solid revenue trajectory. Key risks include competitive pressures and COVID-related disruptions, but the BUY rating reflects confidence in its long-term growth potential and valuation stands justified.