CICC: Very busy maintaining momentum (01768) outperforming the industry rating target price of HK$530

The Zhitong Finance App learned that CICC released a research report saying that considering the increasing speed of store opening in Ming Ming (01768) and the continued improvement in profitability due to scale effects, the bank raised 26/27 profit 35.1%/44.8% to about 50/6.56 billion yuan. The current stock price corresponds to 15/11 times P/E in 26/27. Despite the increase in profit forecasts, the sector's valuation center declined somewhat. The bank kept its target price of HK$530 unchanged and maintained an industry rating. The stock price had room to rise by about 32%, and the target price corresponded to about 20/14.7 times P/E in 26/27.

CICC's main views are as follows:

1H26 profit performance exceeded the bank's expectations

1H26 GMV was 63.9 billion yuan (+55.4% YoY), revenue of about 45 billion yuan (+60% YoY), adjusted profit of 2,447 billion yuan (YoY +136.5%), and adjusted profit margin was 5.4% (YoY +1.8/1.0pct). 1H26's profit performance exceeded the bank's expectations. The bank's forecast is related to store opening exceeding expectations and improving gross margin driven by scale effects.

1H26 stores expanded rapidly, and same-store revenue increased year-on-year

At the end of 1H26, the number of stores was 26,405 (26,396 franchise stores), an increase of 4,457 compared to the end of '25. The acceleration in store opening was mainly due to the increase in enthusiasm of old franchisees to open stores and the digitalization of company location selection to improve the efficiency of opening stores, and only 121 franchisees closed. 1H26 average single-store GMV and average single-store revenue were 264/1.86 million yuan respectively, +0.2%/+3% year-on-year, respectively. The bank expects same-store performance to be better than average single-store revenue performance, and same-store revenue will continue to grow despite rapid store expansion.

1H26 profitability continues to improve

The gross margin of 1H26 reached 11.5% (+2.2/+1.3 pct yoy, respectively). The bank mainly expects the procurement bargaining power of upstream suppliers to continue to improve and the efficiency of the company's supply chain after the increase in scale; the 1H26 sales cost rate/management expense ratio is -0.1/-0.2 pct year on year, respectively, which is expected to be related to scale effects. The comprehensive adjusted net interest rate was 5.4%, +1.8/1.0pct yoy.

Looking forward to 2H26-2027: The company will continue to optimize store operations, franchisees are willing to open stores, and stores are expected to maintain a relatively fast opening speed

1H26 continues to revise its stock stores and optimize the addition of frozen products (including sausages, egg tarts, etc.). However, due to the rapid pace of 1H26 store opening, resources have been scattered in terms of stock store adjustments. The bank expects the company to continue to advance in the second half of the year. Old franchisees are willing to open stores in 2025-2026, and the bank expects stores to maintain a relatively fast opening speed.

Risk warning: Increased competition in some regional industries, franchisee management risks, food safety risks.