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

O2O Playing a More Prominent Role in China Street Drinks

[Luckin Coffee Inc. (LKNCY US, UR) Earnings Review]: Operational Turnaround, Now All Eyes on Growth

[Luckin (LKNCY US, SELL, TP US$17) Rating Change]: Old Tricks Might Have Run Out of Its Use

[Luckin Coffee (LKNCY US, BUY, TP US$37) TP Change]:Weak Sales in 1Q24 but Likely to Improve in 2Q24

Luckin's Small Step into Non-Coffee Drinks Is a Big Step of Its Future Directions

Battle Lines Drawn As BABA Builds Out First/Last-Mile Capacity; But Who Will Fund 75+ Bn CNY CapEx?

Blue Lotus China New Economy Research, Blue Lotus Research Institute

Eric Wen

Blue Lotus China New Economy Research

Equity Bottom-Up

<ul>
<li>Luckin’s SSSG declined 20.9%YoY in the peak season, indicating diseconomies of scale for Luckin and a deteriorated competitive environment. We do not expect a quick turnaround in the near term.</li>
<li>We think Luckin has limited capability to further raise its prices in 3Q24, and expect its NPM to be 11.9%/7.1% in 3Q24/4Q24 as the new norm.</li>
<li>We keep SELL rating and lower TP to US$16.5/ADS. The stock trading at 20x/16x PE in 2024/2025, and we expect the NI to increase 15%CAGR in the next 2 years.</li>
</ul>


Luckin’s SSSG declined 20.9%YoY in the peak season, indicating diseconomies of scale for Luckin and a deteriorated competitive environment. We do not expect a quick turnaround in the near term.
We think Luckin has limited capability to further raise its prices in 3Q24, and expect its NPM to be 11.9%/7.1% in 3Q24/4Q24 as the new norm.
We keep SELL rating and lower TP to US$16.5/ADS. The stock trading at 20x/16x PE in 2024/2025, and we expect the NI to increase 15%CAGR in the next 2 years.


[Luckin Coffee (LKNCY US, SELL, TP US$16.5) TP Change]: Milkteaization Diminishes Differentiation