【行业研究报告】大家乐集团-Light at the end of the tunnel

WeupdatedwithmanagementandbelieveSSSshouldreturntogrowthand
marginshouldfurtherimprovein2H3/23E,despitetheweakeconomicgrowthin
HKandmassivecovid-19outbreaksinGZinNov2022.WemaintainBUYbut
cutTPtoHK$15.12,basedon22xFY3/24EP/E(upfrom20x),vs5-yearavg.of
20x,aswebelievetheworsthaspassedforHKretailindustry.
OutperformedinHKandwearemorepositiveabout2H3/23E.CDC’s
HKmarketsalesincreasedby0.5%YoY(QSRsalesup0.5%)in1H9/23,
HKmarketsalesincreasedby0.5%YoY(QSRsalesup0.5%)in1H9/23,
slowingdownfroma4.8%growthin2H22,butitstillmanagedtooutperform
theHKcateringsalesdeclineof1.8%(fastfoodsalesdown0.7%).We
attributedthistoCDC’seffortsonrevampingitsofferingsandbranding,
throughlaunchingmorenewproducts(manyplant-basedSKUs)andsocial
mediamarketingcampaign(the“ATasteofTogetherness”hadevenwona
GoldEffieatthe2022EffieAwardsHongKong).WeestimateSSSGtobe-
veHSD/-veMSDinApr-Jun2022/Jul-Sep2022,andcouldstillbefalling
slightlyinOct-Dec2022.ButthankstolowbaseinJan-Mar2021,webelieve
SSSGin2H3/23Ecanbegrowingby~14%.Moreover,wealsothinkthe
institutionalcateringbusinesscanfurtherrecover,associaldistancing
measuresgraduallyliftedintheprimary/secondaryschoolsandhospitalsin
thefuture.
Weexpectmarginstocontinueclimbingin2H3/23E.Eventhoughthe
paceofsalesrecoveryin1H9/23wasslowerthanourexpectation,margin
improvementwasfairlystrong(esp.withthelockdowninHKinApr2022).
Webelievethetrendshouldsustaininto2H3/23E,drivenby:1)anotherASP
hike(atleastHK$1,or3-4%YoYgrowth)toabout~HK$41and2)reduction
inrentalexpensesperstore(theresultofaweakeconomyandrising
vacancyforstreetlevelshops).Ontheotherhand,ariseinminwagesfrom
HK$37.5toHK$40ishighlylikelyin2023,butwebelieveCDCwouldbe
abletocompensateandretaintheirstaffsfairly.
Storeopeningplansloweddownin2H3/23Ebutshouldbeatleastflat
inFY3/24E.CDCopened11/10newstoresinHK/Chinain1H23,andwe
nowexpect15/15netopeningsin2H3/23E,afterthecompanyrevisedits
grossopeningtargetfrom30-40/30-40inHK/mainlandChinato20-30/20-
30inFY3/23E.WebelievethenewstorenumbersinFY3/24Eshouldnot
belessthanthatinFY3/23E.
MaintainBUYandcutTPtoHK$15.12.WecutourEPSestimatesby42%/
12%/7%inFY23E/24E/25E,tofactorintheoperatingleveragein1H9/23
andslowdowninstoreexpansion.WemaintainBUYbutcutTPtoHK$15.12
basedon22xFY3/24P/E(upfrom20x).Itistradingat19xFY3/24EP/E,
whichisnottoodemandingvsits5-yearavgof20x,inourview.