China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

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China/Asia TMT

Shawn Yang

Equity Bottom-Up

<ul>
<li>We expect Luckin to report 2Q23 rev. at 75.0% YoY and 30.1% QoQ to RMB5,771mn. We expect GPM, non-GAAP OPM, non-GAAP NPM to decline 3.7ppt, 3.6ppt, and 3.9ppt QoQ .</li>
<li>Luckin is putting scale ahead of profitability, surpassing 10k total stores in 2Q23 and heading to 12k total stores in 2023, while maintaining a decent margin. </li>
<li>We maintain the stock as BUY rating and cut TP by US$3.5 to US$37.5 (36x PE in 2024) to factor in the margin dilution effect from sales promotion.</li>
</ul>


We expect Luckin to report 2Q23 rev. at 75.0% YoY and 30.1% QoQ to RMB5,771mn. We expect GPM, non-GAAP OPM, non-GAAP NPM to decline 3.7ppt, 3.6ppt, and 3.9ppt QoQ .
Luckin is putting scale ahead of profitability, surpassing 10k total stores in 2Q23 and heading to 12k total stores in 2023, while maintaining a decent margin. 
We maintain the stock as BUY rating and cut TP by US$3.5 to US$37.5 (36x PE in 2024) to factor in the margin dilution effect from sales promotion.


Luckin Coffee (LKNCY US, BUY, TP US$37.5) TP Change:Promotion and Expansion Are the Main Theme