UBS: Raises GUMING (01364) target price to HK$31.15, maintains "buy" rating.

UBS released a research report stating that GUMING (01364) has seen a same-store sales growth of around 10% so far this year, with plans to open 1,500 to 2,000 stores, both of which exceed the bank's previous estimates. Based on discounted cash flow (DCF) valuation, the bank has raised GUMING's target price from HK$19.28 to HK$31.15, which is equivalent to forecasted price-to-earnings ratios of 34 times and 27 times for 2025 and 2026 respectively. The dynamic price-to-earnings ratio for 2025 is 1.4 times, lower than the average forecasted price-to-earnings ratios of 43 times and 35 times for new consumer companies in 2025 and 2026, and the average dynamic price-to-earnings ratio of 1.9 times in 2025. The bank maintains its "buy" rating on GUMING. The bank believes that GUMING's outperformance is due to the company's product innovation (such as launching coffee drinks) and subsidies from JD.com in food delivery. Despite a 190% increase since its initial public offering, the bank still maintains a "buy" rating on GUMING and considers its current valuation attractive (1.3 times dynamic price-to-earnings ratio, compared to 1.9 times for Chinese peers). The bank's profit forecast for GUMING is 4% to 14% higher than the market average for the industry. The bank notes that GUMING management has reiterated its long-term goal of reaching 30,000 stores by 2030, which the bank estimates will support approximately 20% annual store growth. GUMING is currently operating in 20 provinces, with the three core provinces (Zhejiang, Jiangxi, and Fujian) accounting for around 40% of total stores (compared to 11% of China's total population), demonstrating its potential for expansion in non-core areas. UBS has raised its earnings per share forecasts for GUMING for the years 2025 to 2027 by 6% to 11%, mainly driven by an increase in revenue forecasts by 6% to 12%, reaching RMB 11.5 billion, RMB 14.1 billion, and RMB 17.2 billion respectively, benefiting from: 1) faster-than-expected store openings in third- and fourth-tier cities and more regions in mainland China; 2) expected 6% year-on-year growth in same-store sales in 2025, driven by the launch of coffee drinks.