Luckin Coffee(US:LKNCY) SINOLINK SECURITIES·2025-07-28 12:36Investment Rating - The report assigns a "Buy" rating to the company with a target price of 285.77 RMB per ADS, corresponding to 40.01 USD per ADS based on a FY2026 PE of 18X [4]. Core Views - The company has a strong market position with over 24,097 stores as of Q1 2025, focusing on a self-pickup model at an affordable price range of 10-15 RMB [2]. - The company is expected to see significant growth in non-GAAP net profit, projected at 43.42 billion RMB for FY2025, 56.05 billion RMB for FY2026, and 73.12 billion RMB for FY2027, reflecting year-on-year growth rates of +32.1%, +29.1%, and +30.5% respectively [4]. - The coffee market in China is anticipated to grow at a CAGR of 21.6% from 2023 to 2027, indicating substantial potential for the company [49]. Summary by Sections Company Overview - The company operates a self-pickup model and has established itself as a leading player in the coffee market with strong capabilities across products, channels, brands, and supply chains [2]. Investment Logic - The company is positioned to benefit from the growing coffee consumption trend in China, with significant room for growth compared to more mature markets like the US and Japan [49]. Profit Forecast, Valuation, and Rating - The company’s revenue is projected to grow from 24.9 billion RMB in 2023 to 67.9 billion RMB by 2027, with a compound annual growth rate (CAGR) of 20.1% [8]. - The report highlights a healthy growth trajectory in both direct and franchise operations, with direct store numbers expected to increase significantly [70]. Strategic Store Opening - The company has entered a positive same-store sales growth cycle with a Q1 2025 same-store sales growth (SSSG) of +8.1% [15]. - The company has maintained a rapid store opening pace, with a net increase of 1,757 stores in Q1 2025 [32]. Competitive Positioning - The company leads the industry in terms of store count and market share, with a GMV market share of 21.8% as of 2023 [29]. - The company has a robust supply chain and digital capabilities, enhancing operational efficiency and product innovation [46]. Market Potential - The coffee market in China is still in a growth phase, with significant potential for increased per capita consumption [49]. - The company is exploring international markets, having entered regions like Singapore, Malaysia, and the US, with a focus on competitive pricing [56]. Financial Projections - The company expects to achieve substantial revenue growth driven by both direct and franchise operations, with total revenue projected to reach 46.95 billion RMB in FY2025 [70]. - The report anticipates a decrease in fulfillment costs as the number of stores increases, contributing to improved profitability [73].