[ET Net News Agency, 22 January 2021] Goldman Sachs lifted its target price for Zhou
Hei Ya International (ZHY) (01458) to HK$12.3 from HK$11 and maintained its "buy" rating.
The research house raised its estimates for ZHY, more for the outer years than in 2022
to reflect the faster-franchised store expansions and solid profit margin from the
franchise model.
For 2020, ZHY opened nearly 600 franchise stores and set the target to have a total of
3-4K stores by 2022. Goldman sees the expansion pace as ahead of schedule and given its
strong pipeline (more than 20K store applications), the research house sees visibility of
2021-22's expansion as elevated and steady.
While the traffic in stores has not fully recovered and there can be some near-term
volatility due to Covid-19 cases in 1Q 2021, Goldman sees that the company's high product
launches and multiple channel expansion (online/O2O, modern trade, etc.) should drive its
overall sales recovery.
As franchise store sales continue to ramp up, it estimated ZHY will reach 20-25% OPM
under this model, assuming annual store retail sales of RMB1-1.2mn. (KL)