Huaan: First Coverage of GUOQUAN (02517) with "Buy" Rating, Untapped Market Potential

Huaan released a research report stating that, based on the short-term prospects of GUOQUAN (02517) in 2026, expanding scenarios and focusing on penetrating markets will serve as an effective investment catalyst for the company. By focusing on best-selling products with a good value proposition and targeting the lower-tier market, the company is expected to return to a growth path in 24H2. The firm believes that the company is currently in the early stages of the second growth cycle, initiating coverage for the first time and giving it a "buy" rating. Key points from Huaan: Short-term prospects in 2026 Through comparative studies on GUOQUAN and three different business formats in the lower-tier market - chain restaurants, bulk snacks, and freshly brewed tea drinks, the firm calculated the long-term space for store expansion/single store in GUOQUAN's future revenue increment and the enhancement space for the three major optimization paths in profit increment. Based on the short-term outlook for 2026, expanding scenarios and focusing on penetrating markets will serve as an effective investment catalyst for the company. Revenue increment: How to view the new round of growth space for ten thousand stores The company has already reached a scale of ten thousand stores. Looking ahead to the next stage, the firm believes that: 1) the future increment in store expansion will mainly come from the lower-tier market, with limited growth expected from high-tier markets, but significant potential in the lower-tier market (focusing on reinforcement in third-tier cities and core effort in fourth-tier cities and below); 2) the future increment in store efficiency will mainly come from focusing on customer volume and repurchase rate, driving continuous growth in the same store; 3) competition considerations - the feasibility support behind the growth space, the company's excellent single store model (rural town model superior to high-tier, superior to bulk snacks), and independent competitive logic (forming differentiated competition with food supply/retail companies) are effective support for the future expansion logic in the lower-tier markets. The firm's steady-state space calculation: benchmarking three categories of lower-tier business formats - chain restaurants/bulk snacks/freshly brewed tea drinks, the company's steady-state lower-tier space is 17,000 stores (1.7 times current increment), total space is 23,000 stores (1.1 times current increment), corresponding to a GMV scale of 14.1/23.3 billion yuan. Profit increment: How to view the magnitude and pace of profit improvement Since 2025, the company has entered an accelerated phase of profit improvement. Comparing with similar leading targets in the chain industry, the firm believes that the company has significant profit elasticity. Future profit improvement paths such as cost reduction in the supply chain, the maturity of the traffic diversion model, and the release of scale effects are clear, with a potential net profit margin ceiling of 10% in the long term. Supply chain efficiency corresponds to a 3-5% optimization space in the long term, the mature traffic diversion model and scale effect release correspond to a 4-6% optimization space. Investment recommendation: The firm expects the company's revenue to be 76.2/89.7/104.7 billion yuan in 2025-2027, with year-on-year growth of +17.7%/17.8%/16.7%, corresponding to net profit attributable to the parent company of 4.3/5.8/7.4 billion yuan in 2025-2027, with year-on-year growth of +85.5%/34.9%/28.3%, and PE multiples of 19/14/11x. Risk warning: Pressure from store expansion/same-store sales, category expansion, intensified competition, capacity expansion, food safety.