CICC: The Leading Company in China's Ten Thousand Stores Has Clear Room for Valuation Improvement, Combining Growth and Value

CICC released a research report stating that Wan Store has become a milestone in China's large-scale consumer chain industry. Why Wan Store? By refining a sharp store model, it penetrates the deepest layered consumer market. After Wan Store, there is often another Wan Store, where the scarce scene foundation and scale advantages are expected to drive profitability to a new level. Looking globally, the valuation upgrade potential for China's Wan Store leaders is clear, combining growth with value. CICC's main viewpoints are as follows: Why Wan Store: Using the sharpest store model to crystallize the greatest common divisor of Chinese consumption. 1) The Wan Store gene comes from standardized expansion, consumer-friendly pricing, and a locally adapted expansion model: with products that are easy to standardize and light service, the chain rates for wholesale snacks and freshly made beverages have reached 92%/49%. Affordability, value for money, and availability drive Wan Store's penetration into lower-tier markets. The deeper the layout, the lower the management complexity, and the greater the necessity for franchise opening. 2) Three pillars and one foundation build Wan Store capabilities: with a foundation in supply chain, store and franchisee management, and brand value construction, digital capabilities run throughout. The Wan Store model generally has low product complexity, where strong supply chain capabilities take precedence over major product innovation capabilities; the payback period for small franchise health stores is under 2 years, stemming from a strong management system benefiting the Wan Store model; scale serves as a medium, and density equates to voice; the Wan Store itself is the best brand promotion. 3) New Wan Stores: leaders in freshly made beverages, wholesale snacks, and chain hotels are in a growth flywheel, while the momentum of some older Wan Stores has weakened. After Wan Store: from store replication to capability reuse, seeking growth in breadth, depth, and efficiency. 1) Top domestic brands are achieving surplus growth: Mixue/Lucky Coffee have validated the high-density nationalization path, with occupancy rates at primary business locations reaching 75%/72%. There is significant expansion space for wholesale snacks and mid-range tea beverages. Wholesale snacks exhibit stronger regional barriers, with market shares in leading cities for wholesale snacks/tea drinks/coffee hitting 97%/70%/67%. 2) Going overseas presents great opportunities: By 2025, the overseas store ratios for McDonald's/Starbucks/Mixue/Lucky Coffee will be 70%/55%/7%/1%; local supply chains and operational systems replicate efficiency, which is key. 3) Category expansion, quality improvement, and brand upgrading: Point, timing, and demand complement to achieve capability reuse and category expansion, such as the integration of tea and coffee; supply chain efficiency releases drive quality improvement, boosting repurchase and same-store growth, like the pure upgrade of tea beverages; brand upgrading comes from backend platform reuse and front-end brand elevation, as seen with Huazhu's premiumization. 4) Compressing links, scale effects, and reshaping the value chain drive profitability: wholesale snacks cut through circulation costs and reshape the value chain to create incremental value. Wan Store investment: Growth and value coexist; now is the right time for valuation upgrades for China's Wan Store leaders. 1) A dual investment framework of growth and value: overseas Wan Store chains have both high cash flow and long-term operational resilience, while global chain restaurants are entering stable returns; some domestic Wan Store chain brands possess both growth and value, while others are in the reinvestment phase. 2) China's Wan Store leaders are significantly undervalued: under consistent expectations, the average PE for top overseas/Chinese hotel and restaurant brands is 33x/15x and 29x/15x. Risks Consumer demand is under pressure, industry competition is intensifying, and corporate management capabilities may not improve as expected.