As the exclusive distributor of Domino's, the leading brand in the pizza industry, Dashi Co., Ltd. has created a competitive barrier by combining a rich variety of products with “takeout must arrive in 30 minutes”. Thanks to strong brand potential, the company accelerated its expansion in new growth regions. Same-store volume and price surged to achieve strong growth. The efficiency of scale led to continuous optimization at the single store level, and the inflection point of profit was reached. In the long run, Dashi Stock still has plenty of room to expand its stores. The single store Op Margin still has room for optimization. It is optimistic that the company will continue to release profits in the future, and for the first time, it has been covered with a “gain” rating.

The leading domestic pizza brand is rapidly expanding, and the same store bucked the trend and grew strongly. As the exclusive distributor of Domino's, the world's largest pizza company, in China, Dashi Co., Ltd. has been rapidly expanding stores in China since 2010. By the end of 2023, Dashi Co., Ltd. had 768 stores, covering more than 20 cities. Thanks to the company's strong brand potential, Domino's Pizza has accelerated the expansion of stores across the country. Among them, the Kitakami market operated steadily, and the new growth market performed brilliantly. While expanding rapidly from other places, the same store bucked the trend and maintained steady growth.

The growth in the scale of the restaurant industry and the penetration of takeout development helped the pizza market expand, and misplaced competition among brands is expected to share the industry's growth. The revenue scale of China's restaurant industry is growing rapidly and is expected to reach 7.7 trillion yuan in 2027. Among them, the Western food market is growing rapidly and leading the industry. The compound growth rate is expected to reach 13.2% from 2022 to 2027, and the rapid development of the delivery market is also expected to drive further growth in the pizza market. In terms of pattern, domestic pizza brands can be divided into two categories according to customer unit price: “focus on high-end market” and “focus on cost performance market”. Major brands compete in a misplaced position, and it is expected that they will share the industry's growth in the future.

Efficient delivery & unique differentiation, there is still considerable room for store expansion in the future. Dashi Co., Ltd. provides customers with the “30 Minute Must Delivery Promise” by hiring full-time riders, optimizing store locations, and intelligent scheduling systems. Combined with the company's own highly localized and rich product matrix, it has a remarkable competitive advantage. The superimposed brand is currently in an upward cycle. Nearly half of the company's stores opened in the top 10 stores in the new region in '23. The store climbing period is short and the same store growth is strong, so I am optimistic that the same stores will maintain steady growth in the future. In the medium to long term, Domino's China has plenty of room to expand its stores. Assuming that it only penetrates into Tier 1, 2 and Tier 3 cities with strong consumption power, the number of stores is still expected to reach 3507 in the future. In terms of the single store model, Op Margin still has room to optimize under the scale effect. With the same store remaining stable, op margin is expected to grow to 15%-18% in the future.

Investment advice: As the exclusive distributor of Domino's, the leading brand in the pizza industry, Dashi Co., Ltd. has strong brand potential and efficient delivery to create a differentiated advantage. It has extensive long-term business space, and Op Margin still has room to optimize under the scale effect. Currently, the company's profit inflection point has appeared, and I am optimistic that subsequent profits will continue to be released. The company's adjusted net profit for 24-26 is estimated to be 0.4/1.3/30 billion yuan, respectively, for the first time covered to give it an “increase in holdings” rating? Risk warning: Store expansion falls short of expectations; store expansion dilutes single store revenue; macroeconomic downside risk.