On August 27, Dashi Co., Ltd. released its 2024 semi-annual report. During the reporting period, the company achieved revenue of 2.04 billion yuan/ +48.3%; adjusted net profit was 0.05 billion yuan (23H1 loss 0.02 billion yuan for the same period), turning a year-on-year loss into a profit. In the first half of 2024, a net total of 146 new stores were added, entering 4 new cities. By the end of June 2024, the company had a total of 914 stores. Thanks to strong brand potential, the company accelerated expansion in new growth regions, and same-store sales bucked the trend and achieved steady growth. The efficiency of scale led to continuous optimization at the single store level, and I am optimistic that the company will continue to release profits in the future.

Revenue & performance are in line with guideline expectations, and the new growth market is growing strongly. 2024H1 achieved revenue of 2.04 billion yuan/ +48.3%. Among them, the new growth market was strong and the revenue share continued to increase. The 24H1 new growth market accounted for about 61.0% /+15.9pct of revenue. During the reporting period, the company achieved adjusted net profit of 0.05 billion yuan (2023H1 loss of 0.02 billion yuan during the same period), turning a year-on-year loss into a profit. Revenue & performance were in line with guideline expectations.

Under offsite expansion, the brand's potential remains strong, and same-store sales bucked the trend and achieved steady growth. By the end of June 2024, the company had a total of 914 stores, 363/551 in Beijing and Shanghai/new growth markets, respectively, and 33 /+13 cities. 24H1 has entered 4 new cities, with a net opening of 146 stores. The opening schedule is in line with expectations. As of August 20, '24, the company has opened 31 additional stores, 29 more stores are under construction, and 21 stores have been signed, which is expected to achieve the goal of opening 240 new stores throughout the year. On the same store side, 24H1's same-store sales growth rate (SSSG) reached 3.6% /-5.2 pct, and the average daily sales volume of a single store was 0.0135 million/ +10.1%. The company's same-store sales grew steadily, and the newly opened stores performed well in new growth markets. There is still room for improvement in subsequent stores, and the brand potential is strong. The overall customer unit price was 83.6 yuan/ -4.6%, mainly due to the relatively low share of 90E8 takeout points for high customer orders in the new growth market, which led to a structural decline in the overall customer unit price. The number of customer members is 19.4 million/ +78.0%, and the membership revenue share is 63.6% /+5.1pct.

The cost side was significantly optimized, and the release of performance was accelerated. 24H1's gross margin was 72.7% /+0.3pct, the adjusted EBITDA margin was 11.4% /+2.2pct, and the store-side operating margin was 19.3% /+0.6 pct. In terms of expenses, employee remuneration, depreciation, amortization, rent, utilities, and advertising expenses accounted for 34.9%/6.1%/9.9%/3.5%/5.4%, respectively. Compared with -4.8pct/-1.0pct/-0.2pct/-0.1pct/-0.5pct, the company benefited from economies of scale and cost reduction and efficiency at the headquarters level, and the company's cost-side optimization was remarkable. During the reporting period, the adjusted net profit margin to mother was 2.5% /+3.8pct, and the improvement in profitability was better than market expectations.

Investment advice: 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 be delivered in 30 minutes”. Thanks to strong brand potential, the company has accelerated its expansion in new growth regions. Over the long term, Dashi Stock still has plenty of room to expand its stores, and 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 maintain a “gain” rating.

Risk warning: Market competition has intensified, raw material prices have risen, and residents' willingness to spend is lower than expected.