Equity Analyst - Asia Consumer Sector, Investory

Devi Subhakesan

Equity Analyst - Asia Consumer Sector

ASIA CONSUMER: INSIGHTS AND INVESTMENT IDEAS

Investory

Investory is a Singapore-based boutique independent equity research firm founded in January 2017 with a primary focus on consumption themes across Asia-Pacific.

We aim to generate investible ideas based on consumption trends and outlook. We screen our ideas on several parameters - product potential, long-term growth and management commitment being the most critical.  We follow a fundamental analysis approach in our stock selection process and are not restricted by market cap.

We aspire to grow into a leading source of unbiased research, free of conflict of interest, for investors yearning for independent and disciplined analysis. 

We also undertake bespoke research mandates to support our Institutional clients’ investment needs.

Our team comprises of professionals with extensive experience in the Asian equity markets, in areas ranging from research, servicing institutional clients and investment management.

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/luckin-coffee-inc" target="_blank" data-smartkarma-citation="entities:28046:1" rel="noopener">Luckin Coffee (LKNCY US)</a> reported another quarter of strong growth and is now China’s leading coffee chain by a wide margin with operating margins outperforming even premium rival <a href="https://www.smartkarma.com/entities/starbucks-corp" target="_blank" data-smartkarma-citation="entities:7641:1" rel="noopener">Starbucks Corp(SBUX US)</a> .</li>
<li>Luckin’s disruptive model—centered on affordability, convenience, and accessibility—and the competition that followed has fueled a 2.5X rise in China’s per capita coffee consumption over the past five years.</li>
<li>​Luckin Coffee's strong growth, high operating margins, dominant market share contrasts with Starbucks, which is now adapting to changing customer preference for convenience and digital experiences.</li>
</ul>



Luckin Coffee (LKNCY US) reported another quarter of strong growth and is now China’s leading coffee chain by a wide margin with operating margins outperforming even premium rival Starbucks Corp(SBUX US) .
Luckin’s disruptive model—centered on affordability, convenience, and accessibility—and the competition that followed has fueled a 2.5X rise in China’s per capita coffee consumption over the past five years.
​Luckin Coffee's strong growth, high operating margins, dominant market share contrasts with Starbucks, which is now adapting to changing customer preference for convenience and digital experiences.


Luckin Coffee: Acing It in China's Racing Coffee Market

Blue Lotus China New Economy Research, Blue Lotus Research Institute

Eric Wen

Blue Lotus China New Economy Research

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

<ul>
<li>Luckin reported C3Q24 revenue 9.8%/6.3% higher than our estimate/consensus, and non-GAAP operating profit 26%/28% higher than our estimate/consensus. </li>
<li>In the short term, Luckin managed to raise price without trigger consumer departure, and may do so for a few more quarters. </li>
<li>We put the TP and the rating under review pending further assessment of US market entry.</li>
</ul>


Luckin reported C3Q24 revenue 9.8%/6.3% higher than our estimate/consensus, and non-GAAP operating profit 26%/28% higher than our estimate/consensus. 
In the short term, Luckin managed to raise price without trigger consumer departure, and may do so for a few more quarters. 
We put the TP and the rating under review pending further assessment of US market entry.


[Luckin Coffee Inc. (LKNCY US, UR) Earnings Review]: Operational Turnaround, Now All Eyes on Growth

Andy Fu

<ul>
<li>On August 7th, Meituan's on-demand order volume reached a historical high of 98mn on surging orders from street drinks. Meituan has connected to the backend systems of street drink vendors;</li>
<li>Delivery order is a double-edged sword. It boosts volume at the expense of margin. Further, the ownership of the volume is questionable;</li>
<li>With Pin-hao-fan, Meituan already atomized the small restaurants. Now Meituan is playing the same trick with street drinks. The result will be more dramatic to the benefit of Meituan.</li>
</ul>


On August 7th, Meituan's on-demand order volume reached a historical high of 98mn on surging orders from street drinks. Meituan has connected to the backend systems of street drink vendors;
Delivery order is a double-edged sword. It boosts volume at the expense of margin. Further, the ownership of the volume is questionable;
With Pin-hao-fan, Meituan already atomized the small restaurants. Now Meituan is playing the same trick with street drinks. The result will be more dramatic to the benefit of Meituan.


O2O Playing a More Prominent Role in China Street Drinks

<ul>
<li>
<a href="https://www.smartkarma.com/entities/yum-china-holdings-inc-0533692c-6dae-4014-baa1-ed0b050638f2" target="_blank" data-smartkarma-citation="entities:29259:1" rel="noopener">Yum China Holdings (9987 HK)</a> reported a marginal 1% year-on-year increase in 2Q2024 revenue, driven by new store additions despite a decline in same-store sales.</li>
<li>Despite a challenging business environment, it achieved 8% year-on-year profit growth in Q2 and stabilised margins through sharp cost management and operational efficiency initiatives.</li>
<li>Without a clear visibility in improvement in consumer sentiment and spending, expect the tough operating environment to limit Yum China's revenue and profit growth potential.</li>
</ul>



Yum China Holdings (9987 HK) reported a marginal 1% year-on-year increase in 2Q2024 revenue, driven by new store additions despite a decline in same-store sales.
Despite a challenging business environment, it achieved 8% year-on-year profit growth in Q2 and stabilised margins through sharp cost management and operational efficiency initiatives.
Without a clear visibility in improvement in consumer sentiment and spending, expect the tough operating environment to limit Yum China's revenue and profit growth potential.


Yum China (9987 HK): 2Q 2024 - Market Expansion Can't Mask Macro Woes

<ul>
<li>Luckin’s SSSG declined 20.9%YoY in the peak season, indicating diseconomies of scale for Luckin and a deteriorated competitive environment. We do not expect a quick turnaround in the near term.</li>
<li>We think Luckin has limited capability to further raise its prices in 3Q24, and expect its NPM to be 11.9%/7.1% in 3Q24/4Q24 as the new norm.</li>
<li>We keep SELL rating and lower TP to US$16.5/ADS. The stock trading at 20x/16x PE in 2024/2025, and we expect the NI to increase 15%CAGR in the next 2 years.</li>
</ul>


Luckin’s SSSG declined 20.9%YoY in the peak season, indicating diseconomies of scale for Luckin and a deteriorated competitive environment. We do not expect a quick turnaround in the near term.
We think Luckin has limited capability to further raise its prices in 3Q24, and expect its NPM to be 11.9%/7.1% in 3Q24/4Q24 as the new norm.
We keep SELL rating and lower TP to US$16.5/ADS. The stock trading at 20x/16x PE in 2024/2025, and we expect the NI to increase 15%CAGR in the next 2 years.


[Luckin Coffee (LKNCY US, SELL, TP US$16.5) TP Change]: Milkteaization Diminishes Differentiation

China

Luckin Coffee Inc. provides non-alcoholic beverages. The Company offers various types of coffee. Luckin Coffee serves customers in China.

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Luckin Coffee (LKNCY US)

Luckin Coffee: Acing It in China's Racing Coffee Market

Luckin Coffee's strong growth, high operating margins, dominant market share contrasts with Starbucks, which is now adapting to changing customer...

Devi Subhakesan

[Luckin Coffee Inc. (LKNCY US, UR) Earnings Review]: Operational Turnaround, Now All Eyes on Growth

Luckin exceeds revenue and profit estimates in Q3, successfully raises prices without losing customers, future plans for US market entry under...

Blue Lotus Research Institute

O2O Playing a More Prominent Role in China Street Drinks

Meituan benefits from surge in delivery orders for street drinks, reaching record high order volume on August 7. Street drink brands are more rely...

Blue Lotus Research Institute

Yum China (9987 HK): 2Q 2024 - Market Expansion Can't Mask Macro Woes

Unless macro economic headwinds ease, the stock - currently trading at the low end of its historical valuation range (14X P/E and 2% dividend...

Devi Subhakesan