CICC: Maintains outperform rating on GUMING (01364), raises target price to HK$36.

CICC released a research report stating that considering GUMING (01364) opened stores at a pace beyond expectations, it raised its adjusted net profit for 25/26 by 9%/19% to 25/32 billion yuan, introducing a profit forecast of 39 billion yuan for 27. The company is currently trading at 20/16 times P/E for 26/27; the target price was raised by 29% to 36 Hong Kong dollars, corresponding to 24/19 times P/E for 26/27 and a 22% upside potential, maintaining an outperform industry rating. Key points from CICC are as follows: Forecasting a 64% year-on-year increase in core profit for 25. The bank expects the company's revenue to increase by 46% in 25, with adjusted core net profit (excluding fair value and pre-tax effects) increasing by 64% to 25.2 billion yuan, corresponding to a 50% increase in revenue for 2H25 and a 78% increase in adjusted core net profit, outperforming market expectations mainly due to the better-than-expected pace of store openings and margin improvement. Maintaining strong growth in same-store sales for 2H25, with franchisee actual income rates under control. Benefiting from subsidies from food delivery platforms, increased contribution from coffee, and new dessert products, the bank expects strong growth in same-store performance for 2H25 and steady growth in same-store sales after the decline in food delivery subsidies in 4Q25. To protect franchisees' actual income rates and profit margins, the company raised food delivery platform prices since July, maintaining stable actual income rates for franchisees from 24, with controllable profit margins. After resolving the bottlenecks in decoration in the second half of the year, the pace of store openings is expected to accelerate, with the bank expecting a net increase of nearly 3,500 stores for the year, surpassing 13,000 stores in total. In 25, the company increased the number of stores in key markets and maintained strong same-store sales performance. Store openings and same-store performance in Shandong returned to normal, with breakthroughs in Hebei and Shaanxi. With the scale effects brought by supply chain efficiency improvements, the bank expects a year-on-year increase in gross profit margin for 2H25, a decrease in sales management expense ratio, driving significant profit growth in 2H25. The core net profit margin for 25 is expected to be better than that for 23, but non-recurring factors such as tax prepayments for dividends and exchange losses may cause some disturbance to the financial statement profits. Focusing on dine-in and brand upgrades in 26, with room for further improvement in same-store sales, expanding the leading advantages. The bank's calculations indicate that the net incremental impact from food delivery subsidies in 25 is less than 10%, and the impact on same-store sales from the decline in subsidies in 26 is limited. In 26, the company will advance its operating hours to 7:30 in the morning, with a focus on dine-in proportion of coffee+bakery, considering the significant contribution of coffee only after October 25 and the flexible and effective introduction of new products. The bank expects same-store revenue to achieve 0-5% growth in 26. The company will actively promote the upgrade of 6th generation store image in 26, focusing on brand upgrades, giving GUMING clearer brand recognition and enhancing brand value. Despite the impact of public opinion in 24 and food delivery subsidies in 25, the company's team and franchisees have demonstrated strong execution capabilities, and the bank believes that the company has broad long-term prospects. It is expected that the company will continue its fast pace of store openings in 26, further consolidating its leading advantages. Risk warning: Fierce competition in the domestic freshly-made tea beverage market, slowdown in store expansion speed, and decline in single-store effectiveness.