Key points of investment
The company released 2023H1 results, revenue increased 32% year-on-year
2023H1 achieved revenue of US$324 million (yoy +32%). Revenue growth was mainly due to continued recovery and recovery in the consumer market in overseas business regions, which led to an increase in turnover. 2023H1 achieved net profit of US$3.39 million, turning a year-on-year loss into a profit. Since 2022H2, net profit has continued to turn a loss mainly due to a significant improvement in employee cost share, optimization of rent cost share, and optimization of depreciation and amortization expenses ratio due to an increase in turnover rate.
Gross margin continues to rise, and proper fee control maintains positive profits
In terms of gross margin, 2023H1 achieved a gross profit margin of 66.3%, an improvement of 1.5 pcts over the previous year. Since 2021H2, the company's gross margin has continued to rise. We expect it to be mainly due to the optimization of procurement costs and the strengthening of store management. In terms of cost rates, the share of 2023H1 employee costs/actual rental costs/other depreciation and amortization increased sharply by 3.6/1.4/1.7 pcts year on year, respectively. We expect this is mainly due to a natural decline in the share of rigid costs due to rising revenue. In terms of net interest rate, 2023H1 achieved a net interest rate of 1.0%, reversing losses year on year and a slight decline from month to month. However, after adding up exchange losses of $10.71 million, the non-net interest rate is about 4.4%, which is almost the same as the net interest rate of 4.6% in H2 2022, demonstrating strong profit stability.
The turnover rate has improved markedly over the same period last year, so wait for the opening of stores to speed up
1) In terms of turnover rate, with the recovery of overseas economies, the turnover rate of each region increased year on year. Looking at the subregion, the 2023H1 Southeast Asia/East Asia/North America region was 3.3/3.1/3.2 times/day, respectively, up 0.1/0.5/0.4 times/day from the previous year. We believe that the general increase in each region is mainly based on the gradual manifestation of the company's proper localization strategy, scale advantage, and refined management capabilities, and the difference in the extent of increase mainly depends on the extent of economic recovery in each region. If the economies of each region of the world continue to improve significantly in the future, the company turnover rate is expected to continue to rise sharply.
2) In terms of opening stores, there is plenty of space, and they are optimistic that the recovery in overseas economies will accelerate profit elasticity after opening stores. Since the beginning of the year, the company has opened 4 new stores, located in the United Arab Emirates/Singapore/Thailand/Australia. Compared to the net opening of 9/8 stores in 202H1/2022H2, the pace of store opening has clearly slowed down. We believe this is mainly due to the uneven pace of overseas economic recovery and the slow pace of recovery in the company's main overseas regions. In a situation where the economic situation in the main overseas regions is weak, the company has completed an orderly expansion of stores and still maintains good positive profits. We believe this is a reflection of the company's excellent operation and management capabilities. We are optimistic that after the overseas economy generally recovers, the company's opening of stores will speed up and further release profit flexibility.
Profit forecasting and valuation
As a leading overseas Chinese food brand, the company has broad prospects with the recovery of overseas consumption and is empowered by brand advantages and newly established supply chains. We expect the company to achieve net profit of 19/52/70 million US dollars in 2023-2025, a growth rate of 169%/35% in 2024-2025, and the company's EPS in 2023-2025 will be 0.03/0.08/0.11 US dollars, respectively, and the corresponding PE will be 60/22/16 times, respectively. In line with the company's development stage, we maintain our “increase in holdings” rating.
Risk warning: macroeconomic downturn, food safety, store expansion falling short of expectations, etc.