20211101-招银国际-奈雪的茶-02150.HK-Softening_demand_and_operating_deleverage_11页

Nayuki Holdings Limited (2150 HK) Equity Research Summary

Core Content and Key Insights

Nayuki Holdings Limited (2150 HK) has been downgraded to HOLD with a revised target price (TP) of HK$10.15, reflecting a more conservative outlook due to softening demand and operating deleverage. The downgrade is based on a Discounted Cash Flow (DCF) model, which implies a ~85x FY22E P/E and ~2.5x FY22E P/S. The current valuation is considered fair compared to the industry average of 2.1x P/S.

Main Factors Affecting Performance

• Sales Decline: Sales in 3Q21 were significantly impacted by the Covid-19 outbreaks, weakening consumer demand, and prudent travel attitudes. A 33% YoY drop in sales per store is expected in 2H21E, while sales per store in 1H21 were up by 16%.
• Operating Leverage: The company is experiencing operating deleverage, especially from staff costs, new store expenses, and initial losses. This has led to margin pressure, with GP margins expected to decline from 68.5% in 1H21 to 65.1% in 2H21E.
• Store Expansion: The FY21E store opening target has been revised up to 350+, with PRO stores (Type I and II) expected to make up 87% of the total. However, the sales per store growth remains a critical factor for future expansion plans.
• Profit Adjustments: The company expects an adjusted net loss in FY21E due to the aforementioned challenges. Net profit estimates for FY21E, FY22E, and FY23E have been revised down by 216%, 58%, and 43%, respectively.

Financial Performance Overview

Key Assumptions in DCF Model

• Sales CAGR: 30% for FY20-25E
• EBITDA CAGR: 47% for FY20-25E
• EBITDA Margin: Expected to increase from 7.4% in FY20 to 13.7% in FY25
• WACC: 8.7% (lower than international peers and Greater China peers)
• Terminal Growth Rate: 3.0%

Valuation Summary

• Target Price: HK$10.15 (down from HK$17.10)
• Current Price: HK$10.30
• DCF Valuation: Fully diluted equity value/share is HK$10.15, based on the assumptions and calculations.
• Market Cap: HK$17,666 million
• Average 3-Month Turnover: HK$32.12 million

Shareholding Structure

Share Performance

Sensitivity Test

The DCF model shows that the target price is sensitive to changes in terminal growth and WACC:

The valuation is based on a 3.0% terminal growth and 8.7% WACC.

Summary of Key Points

• Downgrade: To HOLD due to softening demand and operating deleverage.
• Target Price: HK$10.15, down from HK$17.10.
• Sales Trends: Significant drop in 3Q21, with cautious outlook for 4Q21E. Sales per store growth is expected to slow down.
• Profit Outlook: Adjusted net profit is expected to decline in FY21E, with revised estimates.
• Store Expansion: FY21E target of 350+ stores, with PRO stores dominating.
• Valuation: Based on DCF model, implying ~2.5x FY22E P/S, which is fair compared to peers.
• Market Cap: HK$17,666 million.
• Share Performance: Negative returns in the past 1 and 3 months.
• DCF Assumptions: Sales and EBITDA growth, WACC, and terminal growth rate are key drivers.

Conclusion

Nayuki Holdings Limited faces challenges in sales recovery and operating efficiency, which have led to a downgrade and revised target price. The company's store expansion strategy is expected to continue, but sales per store growth remains a critical factor. The DCF model supports the revised target price, with a fair valuation based on current market conditions.