Greater China Equity Long/Short Analyst

Eric Chen

Equity Bottom-Up

<ul>
<li>We believe consensus has not fully captured the company’s margin upside for FY24/25, likely due to management’s excessively conservative guidances.</li>
<li>Our confidence is underpinned by positive SSSG trend, accelerating store expansion and clear trajectory for store margin improvement.</li>
<li>We expect the company to generate RMB150/320 million adjusted net profit for FY24/25 respectively, compared to RMB30/150 million baked in consensus. Reiterate buy with HK$80 target price (30x FY25 earnings).  </li>
</ul>


We believe consensus has not fully captured the company’s margin upside for FY24/25, likely due to management’s excessively conservative guidances.
Our confidence is underpinned by positive SSSG trend, accelerating store expansion and clear trajectory for store margin improvement.
We expect the company to generate RMB150/320 million adjusted net profit for FY24/25 respectively, compared to RMB30/150 million baked in consensus. Reiterate buy with HK$80 target price (30x FY25 earnings).  


DPC Dash (1405 HK): Margin Potential Underappreciated

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>While the FY23 results of DPC Dash (DPC) were roughly inline, we do find its GP margin and sales per store growth very decent and should support a better outlook in FY24E.</li><li>DPC remains our top pick in the catering sector, thanks to its value for money position, huge room for expansion in China and esp. its consistent success in new growth markets.</li><li>We maintain BUY but fine-tune its TP with a lower P/S.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

While the FY23 results of DPC Dash (DPC) were roughly inline, we do find its GP margin and sales per store growth very decent and should support a better outlook in FY24E.DPC remains our top pick in the catering sector, thanks to its value for money position, huge room for expansion in China and esp. its consistent success in new growth markets.We maintain BUY but fine-tune its TP with a lower P/S.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

DPC Dash (1405 HK) – Sales Beats as New Markets Continue to Succeed

<ul>
<li>We had conversations with industry consultants and business executives from China’s catering sector to understand the impact of the country’s weak economy on consumer behavior and sector outlook for 2024.</li>
<li>We expect moderate pricing competition, continued rise of social media in generating online food orders and key industry players’ increased focus on smaller-size store formats.</li>
<li>While we are still cautious about the sector in general, we reiterate bullish view on DPC Dash, which we believe will outperform and has potential to double in two years. </li>
</ul>


We had conversations with industry consultants and business executives from China’s catering sector to understand the impact of the country’s weak economy on consumer behavior and sector outlook for 2024.
We expect moderate pricing competition, continued rise of social media in generating online food orders and key industry players’ increased focus on smaller-size store formats.
While we are still cautious about the sector in general, we reiterate bullish view on DPC Dash, which we believe will outperform and has potential to double in two years. 


China Catering: Channel Checks Reinforcing Our Bullish View on DPC Dash

<ul><li>We initiate coverage on DPC Dash with BUY and TP based on a 2.3x FY24E P/S, and put it as our sector top pick.</li><li>We forecast 36% sales CAGR in FY22-25E and 0%/ 3% adj. NP margin in FY24E/25E, driven by rapid store expansion and store ramp-up in new growth markets.</li><li>Moreover, Domino’s Pizza has managed to capture the No.1 or No. 2 spot in Japan, South Korea and the Taiwan region, hence for the mainland China, we do expect it to surpass Champion Pizza (with over 2,200 stores) in long run. Current valuation of 1.8x FY24E is not demanding.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

We initiate coverage on DPC Dash with BUY and TP based on a 2.3x FY24E P/S, and put it as our sector top pick.We forecast 36% sales CAGR in FY22-25E and 0%/ 3% adj. NP margin in FY24E/25E, driven by rapid store expansion and store ramp-up in new growth markets.Moreover, Domino’s Pizza has managed to capture the No.1 or No. 2 spot in Japan, South Korea and the Taiwan region, hence for the mainland China, we do expect it to surpass Champion Pizza (with over 2,200 stores) in long run. Current valuation of 1.8x FY24E is not demanding.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

DPC Dash (1405 HK) – Value, Delivery and New Markets-Driven Growth

Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

<ul>
<li>Although Hong Kong markets have slumped after Trump's election, mainland China's markets have gained.  Southbound net buying of HK stocks hit a 2024 high on the day Trump won.</li>
<li>
<a href="https://www.smartkarma.com/entities/sands-china-ltd" target="_blank" data-smartkarma-citation="entities:182:1" rel="noopener">Sands China (1928 HK)</a> had a breakout from a double top as Macau recorded good Golden Week arrivals.  <a href="https://www.smartkarma.com/entities/blue-moon-group-holdings" target="_blank" data-smartkarma-citation="entities:29179:1" rel="noopener">Blue Moon Group Holdings (6993 HK)</a> had a breakout after 3 years.
</li>
<li>
<a href="https://www.smartkarma.com/entities/cansino-biologics-inc" target="_blank" data-smartkarma-citation="entities:27739:1" rel="noopener">CanSino Biologics (6185 HK)</a> formed a breakout after a new vaccine was approved and it reported better results.  <a href="https://www.smartkarma.com/entities/haidilao-international-holding" target="_blank" data-smartkarma-citation="entities:27044:1" rel="noopener">Haidilao International Holding (6862 HK)</a> share price advanced as it expands stores.
</li>
</ul>


Although Hong Kong markets have slumped after Trump's election, mainland China's markets have gained.  Southbound net buying of HK stocks hit a 2024 high on the day Trump won.

Sands China (1928 HK) had a breakout from a double top as Macau recorded good Golden Week arrivals.  Blue Moon Group Holdings (6993 HK) had a breakout after 3 years.


CanSino Biologics (6185 HK) formed a breakout after a new vaccine was approved and it reported better results.  Haidilao International Holding (6862 HK) share price advanced as it expands stores.



Technically Speaking, Breakouts and Breakdowns: HONG KONG (NOVEMBER 13)

China

DPC Dash Ltd operates franchise fast food restaurants. The Company through its chain stores, supplies pizza, drinks, and other related snacks. DPC Dash conducts businesses in Shanghai and Hong Kong.

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DPC Dash (1405 HK)

DPC Dash (1405 HK): Margin Potential Underappreciated

Consensus underestimates the company's margin upside for FY24 and beyond, which is driven by positive SSSG trend, improving store economics and...

Eric Chen

DPC Dash (1405 HK) – Sales Beats as New Markets Continue to Succeed

While the FY23 results of DPC Dash (DPC) were roughly inline, we do find its GP margin and sales per store growth very decent and should support a...

CMB International

China Catering: Channel Checks Reinforcing Our Bullish View on DPC Dash

Our conversations within industry practitioners suggest 2024 will see moderate pricing pressure, continued rise of social media in order generation...

Eric Chen

DPC Dash (1405 HK) – Value, Delivery and New Markets-Driven Growth

We forecast 36% sales CAGR in FY22-25E and 0%/ 3% adj. NP margin in FY24E/25E, driven by rapid store expansion and store ramp-up in new growth...

CMB International

Technically Speaking, Breakouts and Breakdowns: HONG KONG (NOVEMBER 13)

Mainland China's A-share market advanced after Trump's election as South Connect buying hit a 3 year high. Sands China had a breakout as Macau...

David Mudd

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