The Zhitong Finance App learned that Guotai Junan released a research report stating that it maintains the “increase” rating of Mingchuang Premium (09896). The estimated revenue for the 2024-2026 fiscal year is 146.61/171.20/19.825 billion yuan, and the adjusted net profit is 23.27/28.08/3.33 billion yuan, respectively. Considering that the company is in a period of rapid growth, domestic stores continue to expand, and overseas direct management accelerates the release of operating leverage, the room for growth can be expected. The target price is HK$60.3. The company went overseas to expand its stores to suit local conditions, build a brand with differentiated card slots, accelerate the layout of overseas direct sales to release operating leverage, and the room for growth is worth looking forward to.

Guotai Junan's main views are as follows:

The US comprehensive retail market is 100 billion dollars, and the economy fluctuates, supermarkets, and the grocery business format rotates.

In the 1950-1980s, grocery stores provided near-market retail+low-price small-size product options, competing with large stores; in the 1990s, the influx of immigrants expanded demand for cheap products, sufficient supply from Mexico and China, and the rapid rise of grocery stores; economic recovery from 2000 to 2007, rapid development of warehouse-style supermarkets seized market space in the grocery industry; in 2008-2022, the economic crisis+e-commerce penetration rate increased, catalysing the development of grocery stores. The industry has now reached a mature stage. In 2008-2022, the grocery industry had a CAGR of 5.3%, and CR5 represented by Dollar General/Dollar Tree reached 82.5%.

Reviewing the development history of the Big Three American grocery companies, differentiation brings opportunities for growth.

Dollar General focuses on low-income customer base positioning, supporting better procurement prices based on differentiated customer base traffic, and the declining channel network layout brings a better cost and cost structure to support the running of the business model; Dollar Tree's extended mergers and acquisitions continue to expand, integrate and collaborate to improve operational efficiency, and innovate business formats to optimize the single store model; there is a phased market gap in the Five Below card toy category, and the rapid rise of the trend. There is still plenty of room for growth in Mingchuang Premium outlets and scale. During the boom cycle, the same store expansion matched release, and enjoyed higher valuations.

Mingchuang Premium's overseas expansion store adapts to local conditions, and a siege of space can be expected.

Relying on the advantages of the supply chain, the company differentiates itself around the three major elements of the human market: ① for young women aged 20-35 with strong spending power; ② product positioning focuses on the three core categories of big toys, big beauty, and big IP; ③ building a brand around shopping centers to establish benchmark stores. The efficiency of pallet operations in the North American market has improved, and the accelerated layout of direct stores is driving high overseas growth, and operating leverage is expected to be significantly released; overseas markets have huge potential to open stores, and channel expansion and growth can be expected.

Risk warning: Store expansion and store efficiency performance fall short of expectations; industry competition increases risk.