Hongqi Chain (002697): Southwest Convenience Store Leader Strengthens Shortboard and Expands

Hongqi Chain (002697): Southwest Convenience Store Leader Strengthens Shortboard and Expands
Southwest convenience store chain leader, step by step for the steady expansion of the company. Backing Chengdu, radiating Sichuan, focusing on the convenience store’s main business, with “convenient, affordable, assured” as its long-term business philosophy. Since 2015, it has continuously acquired Hongyan, Four Seas, Reciprocity, and 9010 supermarkets.In order to maintain the steady development trend of the business, the regional leaders continued to strengthen.According to the data of the Chain Store Management Association, the company’s revenue in 2018 was 72.200 million US dollars, is the third largest convenience store chain in developing countries (non-petroleum), and ranks 51st among the top 100 national chain stores.At the same time, the company, New Hope Group, and Sichuan Yinmi jointly established Xinwang Bank to grasp the rise of Internet banking dividends and create a second profit growth point. Xinwang Bank turned losses into profits in 2018 and continued to optimize its profitability. The per capita GDP of second- and third-tier cities in the country that have both regional leadership and growth and complement the supply chain to strengthen competitiveness has intensively exceeded US $ 10,000. Convenience stores are located in the golden period of development. Currently, the top three existing convenience store brands are all regional.Characteristics, in the future, convenience store brands are committed to achieving cross-regional integration, and the concentration will continue to increase (according to Bloomberg data, CR5 in 2018 and Japan are 37 respectively.5% and 73.1%).We judge that the Red Flag Chain will stand out: 1) It will merge into a half-dominated city in Chengdu, with a solid regional division. Considering 苏州桑拿网 store encryption and the development of Sichuan, the growth space will be complementary; 2) Dating Yonghui’s fresh supply chain and Chengdu Budweiser Food to strengthen fresh food and mealsThe food category includes many value-added services, and the customer acquisition ability and consumer stickiness have continued to strengthen; 3) The company has launched smart retail and strengthened logistics construction, and the product allocation rate and store delivery rate have been continuously optimized. Profit forecast and investment advice The company adheres to the expansion of competition barriers with “goods + services”, relying on dense offline outlets, the brand has gained popular support.Considering the company’s regional leadership and growth, the merger of Xinwang Bank will continue to contribute incremental income, and it is expected that it will return to its mother’s net profit in 2019-2021.01/4.79/5.65 ppm, an increase of 24 in ten years.3% / 19.4% / 18.0%, referring to the estimated situation of comparable retail leaders, giving the company 24xPE for 19 years, corresponding to a reasonable value of 7.08 yuan / share, maintaining the “overweight” rating. Risk reminder: the risk of continued intensified competition in the retail market; store renovation and upgrading are not up to expectations; store expansion is not up to expectations;