The readings of this report are as follows:

China's pub industry is in a period of rapid development. Helen has become a leader in the industry by virtue of its advantages in scale, brand and technology. it will quickly open a store and expand its retail beer business in the future.

Summary:

Look at the expansion of stores in the short and medium term and the retail business of beer in the long run. Scale advantage + brand advantage + technology advantage build the company's core competitiveness, the company is expected to open 2660 stores, there is still more than 4 times the opening space. The net profit of the maintenance company from 2021 to 2023 is 1.36 billion yuan, respectively, and the corresponding PE is 1.071 million yuan, corresponding to the times of 149-37-19. Maintain the target price of HK $31.6 and maintain the overweight rating.

The recovery is leading the industry. The average daily sales of the same store in October 2021 was the same as that of the same period in 2019. Due to repeated epidemics in November, the average daily sales of the same store returned to 90% of the same period in 2019 and 80% of the same period in 2020 (the same period in 2020 is well controlled. Consumer enthusiasm is high), in the leading position in the industry.

The store is expanding rapidly. In November 2021, the company opened 80 new stores, and a total of 372 stores were opened in 2021, accounting for 110.4% of the 337 stores at the end of 2020. As of December 9, 2021, a total of 466 stores have been completed (including new stores already opened). The number of new stores opened in 2021 mainly depends on the progress of December license processing. The number of new stores to be opened the year after next year is expected to be 630,800.

Scale advantage + brand advantage to build the core competitiveness of Helen Division. (1) scale advantage: the company has a large number of stores, consumes more drinks, can get cheaper drinks from the brand, and the company's own drinks account for 59%, and the gross profit margin is as high as 82%. Therefore, it can maintain the extreme performance-to-price ratio while maintaining a high gross profit margin, and the bargaining power of third-party wine suppliers and self-owned wine factories is further strengthened after rapid expansion. Because of the lower cost and the concept of customer first, Helens offers the greatest discount (6 bottles of beer for new customers, free drinking for seats, 6 bottles of beer for the opening of new stores, etc.) and lower customer costs, which further attract consumers. (2) Brand advantage: Helen is mainly old customers with new customers, with high repurchase rate and strong stickiness. The more stores it can cover, the more consumers it can cover, so as to further enhance the strength of the brand.

Risk tips: food safety risk; repeated epidemic risk; shop opening speed is not as fast as expected.