It is expected that the average daily sales of the company's single store will increase by 7% in October compared with September, and the daily sales of the same store will exceed the same period in 2019. Although the epidemic has interfered again, but the impact on the core cities is limited, the company's operation has not been greatly impacted, and the month-on-month comparison shows a positive trend. According to the official website, 292 new stores were opened in the first 10 months of 2021, and there are currently 262 pipeline.

Affected by the time of the arrival of funds, the interference of the epidemic situation, and the progress of certification, there is a drag on the speed of opening stores, but there is support from the current progress of 400,450 stores throughout the year. The company's stock price has been adjusted a lot recently, and the current valuation (2022 adjusted PE 26X) has strong support. at the same time, the company is expected to enter the Hong Kong stock market in the near future, or form a catalyst on the capital side. Maintain the "buy" rating and recommend active configuration.

In view of Helen's recent business repair, price increase measures, store opening progress and valuation performance, our comments are as follows:

Before the same store surpassed the epidemic in October, the month-on-month trend was clear. According to the company's investor exchange meeting and research information, the Q3 catering industry is generally seriously affected by the epidemic. During the peak period in August, many stores of the company are closed, resulting in losses at the store level; at the same time, the company makes efforts to expand its own brand catering channels in some advantageous areas, coupled with the start-up fees of new stores, Q3 expects the company to lose about 20 million yuan as a whole. At the same store level, September recovered 96% compared with the same period in 2019, a slight increase over the same period in 2020. It is expected that the average daily sales per store in October will increase by 7% compared with September, and the daily sales in the same store will reach 104% in 2019, which is 96% in the same period in 2020. The National Day 2020 is the first long holiday after the epidemic and has 8 days, with a high base under the attribute of retaliatory consumption. We believe that when the impact of the October epidemic is relatively manageable, Helen's same store is higher than the same period in 2019, reflecting the company's brand growth and continued business resilience has been verified.

Positive feedback on small price increases, with the ability to transfer costs. On October 27, the company's official Wechat account raised the price of some beverages by a range of 0.09 yuan to 0.9 yuan. After the price increase, the unit price of beer / beverage is still below 10 yuan, and the amount of consumption per person is expected to increase by about 1 yuan. According to comments on the official Wechat official account and grass-roots research in some stores, the price increase is expected to have a positive impact on gross profit margin without affecting passenger flow. The company has a friendly brand image and a good consumer base under long-term polishing, and has a certain ability to increase prices under the pressure of raw materials, labor and rents. With the upgrading of space and the improvement of experience, it is expected that there is still room for price increases in subsequent high-line cities, but because the price of Helens products is very cost-effective, even if the unit price change is no more than 1 yuan in 10% range, it is expected that it will still be more acceptable to consumers.

Multiple external factors slow down the previous expansion progress and speed up the store opening sprint plan for the whole year. In terms of store opening, due to the delay in the arrival of funds, epidemic control, holiday certification progress and other factors, the speed of store opening in September and October was lower than expected. But the company has accelerated its store expansion, opening 15 new stores in the last week of October and is expected to continue in November and December. From the beginning of 2021 to the end of October, the company opened 292 direct stores. At present, the company's website shows that there are 630 stores and 262 stores are about to open and have specific addresses, supporting the 400 + goal of opening stores for the whole year. The upcoming stores will be dominated by encryption and sinking market development in second-tier cities with better single-store models, with the proportion of first-tier / new first-tier / second-tier / third-tier and below 5%, 37%, 32% and 25%, respectively (12%, 45, 24, and 18% of stores in vs business). We believe that the slower-than-expected progress of store opening is mainly affected by license processing, and it is recommended to closely follow the changes in the number of stores that are about to open.

Since the listing, the company's share price has recovered obviously, and the valuation has been supported at present. Due to market concerns about the achievement of the company's future exhibition store goals and the robustness of individual store revenue, the company's share price has fallen 42% from its peak since its listing. We believe that due to the uncertainty of the economic environment and the epidemic situation, there is indeed a certain degree of uncertainty about the speed of opening stores and the performance of individual stores in the future, which need to be followed up and verified continuously. On the other hand, even according to the calculation of 650 new stores opened in 2022 (the renovation cycle of a single store is only 40 days, and the Capex of only considering decoration is 900000 / house) and the average daily income of a single store for the whole year is 180,000 yuan / day (2021Q1 is 117,000yuan / day, 2021H1 is 119,000 yuan / day), the current market capitalization corresponding to the core net profit of 2022 has dropped to 26X, taking into account the growth stage of the company, the valuation has been supported. At the same time, in December, the company has the probability of entering the Hong Kong Stock Exchange, or forms a catalyst in the capital side, so it is suggested that the low position should be allocated actively.

Risk factors: the risk of food safety problems; the risk that store expansion is not as expected; the risk that the operating efficiency of new stores is not up to expectations; the management risk; the risk of a sharp rise in labor costs and food costs; the risk of tightening of social security, fire and other norms affecting operation; the risk of local epidemic situation repeatedly affecting operation.

Investment advice: October same-store daily sales exceed the pre-epidemic level, repair progress leads the catering industry, funds, epidemic reasons slow down the progress of Q3 store opening, but the current speed has been accelerated and sufficient pipeline reserves. Taking into account the current pace of store opening and the impact of the epidemic disturbance, we adjust the company's annual adjusted net profit forecast for 2021-22-23 to 1.07 billion yuan (1.23 billion yuan for 2.1 pound), and the current price corresponds to the times of PE in 124-26-15. The impact of the short-term epidemic still exists, but Helen has strong operational resilience, excellent single-store model, and high growth potential in the rapid store opening cycle, with reference to comparable company valuation levels, maintaining a 40-fold PE in 2022, corresponding to the target price of HK $23 at the current exchange rate, and maintaining a "buy" rating. Since October, the stock price has been adjusted more, and the valuation is at a reasonably low level, so it is recommended to allocate it actively.