Western Securities Co.,Ltd. has released a research report initiating coverage on BUSYMING (01768), assigning a "Buy" rating. The core investment thesis is based on two key points: firstly, the company's dual-brand strategy is leading the snack retail segment, with its nationwide in-depth layout positioning it to benefit from the sector's expansion, driving continuous penetration growth. Secondly, the firm's strong operational capabilities are expected to deliver sustained profit improvement through product expansion, efficiency gains, and scale effects.

The report forecasts the company's revenue for 2026-2028 to reach 88.0 billion yuan, 104.6 billion yuan, and 119.0 billion yuan, respectively, with corresponding net profits attributable to shareholders of 3.5 billion yuan, 4.4 billion yuan, and 5.5 billion yuan. Using Wan Chen Group, Jiajiayue, Yanjin Shop, and Weilong Delicious as comparable peers, and considering the steady release of growth momentum in the snack retail channel alongside the company's significant leading advantages and broad growth prospects, the coverage is initiated with a "Buy" rating.

Key Report Insights

The report addresses two common market concerns. First, contrary to the view that the snack retail industry has entered a phase of intense competition and squeezed growth for leaders, the analysis argues the channel remains in an expansion phase with room for further penetration increases. Second, while the market may believe low-price competition alone cannot build a durable moat, limiting profit improvement potential, the report contends that BUSYMING can leverage its scale procurement advantages, a refined private brand portfolio, and format upgrades to optimize supply chain reuse and cost control, enabling sustained profit growth alongside scale expansion.

Industry Growth and Consolidation Potential

The logic for market share gains in snack retail includes: efficient upstream and downstream reach providing more cost-effective products; a vast array of snack SKUs meeting diverse consumer needs at low price points while offering emotional value; and a focus on product selection and supplier development for faster, more accurate demand insights.

Business Expansion and Profitability Outlook

The outlook for core business expansion and profitability improvement is positive. By 2025, approximately 60% of the company's stores are located in counties and townships, with 75% coverage of national counties, indicating a deep penetration into lower-tier markets. Meanwhile, the proportion of stores in tier-2 cities and above has increased to 34.50%. The launch of the "Save Money Supermarket" format, featuring fresh food and frozen product sections, represents a new growth curve with a higher probability of success for a leading brand. The company exhibits high personnel efficiency, high inventory turnover, and a high franchisee success rate. Its strong operational capabilities, combined with the release of scale effects, support a promising outlook for profitability enhancement.

Risk Factors to Consider

Potential risks include intensifying industry competition, challenges in full-chain management, and a potential softening of the consumer market.