"Investor Network" Xu Hui

Editor Hu Shan

A year after Helens International Holdings (09869.HK) listed on the Hong Kong Stock Exchange, the first share of the bar, which planned to "open 2200 stores by the end of 2023" in the prospectus, handed over a "quite surprising" semi-annual report on the evening of August 26th.

In the first half of 2022, Helens's revenue increased by 0.6% to 874 million yuan compared with the same period last year, and its net profit expanded to-304 million yuan from-230 million yuan in 2021, with an adjusted net loss of 99.9 million yuan. During the period, the company also optimized and adjusted more than 100 taverns, and the pace of store expansion began to slow. At the same time, in May this year, Helen turned to cook food and opened the first "big stalls + taverns" model of "Helen Siyue" in Lichuan, a fourth-tier city in Hubei province.

So, can Helen, who plans to sink to the county-level market in the future, find a new breakthrough in performance growth through large stalls?

In the secondary market, Helens shares were trading at HK $11.70 as of September 1, halving the market capitalization of HK $30 billion on the day of the listing.

Helens stock market chart

Net profit changes from profit to loss

Since the founder Xu Bingzhong founded the first Helen company in Beijing in 2009, after many adjustments and development in the past 13 years, the company has formed a self-owned beverage with a high performance-to-price ratio (about 60 yuan per capita and 10 yuan of beer per bottle). Pure direct mode expansion of young people's night offline social platform, Helens has also become China's first time on the capital market "pub first stock".

The Development course of Helen Division from 2009 to 2021

In terms of performance, according to the company's pre-listing prospectus, from 2018 to 2020, Helen's revenue was 115 million yuan, 565 million yuan and 818 million yuan respectively, with an annual compound growth rate of 166.91%; and the net profit returned to its mother was 9.734 million yuan, 79 million yuan and 70 million yuan respectively.

From 2021 to the first half of 2022, the company's operating income was 1.836 billion yuan and 874 million yuan respectively, and the net profit was-230 million yuan and-304 million respectively. Compared with a profit of 80.6 million yuan in the same period in 2021, Helens made an adjusted net loss of 99.9 million yuan in the first half of this year, from profit to loss.

Helen's revenue, net profit and growth rate in the past five years

At the interim results conference, Yu Zhen, chief financial officer of Helen Division, said that the loss was mainly due to the impact of the epidemic. In the first half of 2022, the impact of the continuing outbreak on the company was much greater than that at the beginning of the epidemic in 2020. In the first half of the year, the company reached a peak of about 60%, that is, nearly 400 to 500 stores were unable to open stores at the same time. On average, in the whole first half of the year, the normal opening time of the company may only be about 70%.

"Investor Network" flipped through Helens's financial report and found that in the first half of 2022, the overall daily average sales of a single directly operated pub dropped to 7200 yuan from 11900 yuan in the same period last year.

Average daily operating index

With regard to the performance of individual stores and same stores, Yu Zhen said that because the company is an offline intensive activity, closure and control management is more stringent than pure hotels. First-tier cities are the hardest hit areas of the epidemic this year, with an overall daily drop of 40%. However, cities with better regular prevention and control, such as Shenzhen, can also reach 9000 yuan per day on average, and the performance is relatively good. The decline in second-tier cities (Tianjin, Hangzhou, Nanjing) is relatively high, mainly due to the fact that the company has more university stores in second-tier cities, more universities in second-tier cities were closed in the first half of the year, college students were unable to go out normally, and passenger flow declined, which had an impact on the company. The recovery situation in the second half of the year mainly depends on the trend of policy.

In terms of gross yield level, Helens's overall gross margin decreased in the first half of 2022 compared with the same period last year, with self-owned beverages falling to 78.7% from 81.8% in the same period last year, and third-party branded alcoholic beverages to 48.5% from 53.8% in the same period last year.

The company said that the decline in gross profit compared with the same period last year is mainly due to our drainage activities from May to June, such as the large-scale buy one get one free in May and the half price of the second cup in June. To a certain extent, it has increased our gift cost.

In this regard, Cinda Securities also issued a research report saying that the decline in Helen's gross profit margin was mainly due to increased gift activities during the period. The epidemic spread in many places in the first half of 2022, and the company's operation was under short-term pressure. After the epidemic improved, the performance was expected to recover quickly.

It is worth mentioning that Helens relies on the "ultra-high performance-to-price ratio" of each bottle of wine, such as bottled beer priced less than 10 yuan, and third-party beer products such as 1664, Corona and Budweiser are also priced at 9.99 yuan. significantly lower than walnut, hemp tavern and other peer bars, the company is also gradually in the circle among young consumers.

Comparison of the prices of peer products

Anxin Securities Research report shows that Helen's customer base is mainly college students and white-collar workers who have just joined the job and whose consumption level is not high. Because this group is a price-sensitive customer (the company issued a "letter of apology" on the official account last October due to an increase in the price of a single item from 0.09 yuan to 0.9 yuan), and drinking activities with social attributes are usually accompanied by chatting and games. This means that consumers stay in taverns for a long time, even all night, and it is difficult to increase the turnover rate.

Therefore, how the company can achieve profit growth on the basis of no price increase has become the focus of many investors.

Helens wine list

To this end, Helens said that in the future, the company will focus on fine management on the cost side, such as the resumption of annual procurement framework negotiations between the company and third-party liquor brands, and the optimization of the company's staffing structure (13 people per store to 9 people per store). In the first half of this year, the research and development of the company's own products mainly focused on snacks. We can see that the proportion of revenue from snacks has increased by 1.5%. In the second half of this year, our research and development of our own products will be tilted to the beverage side, taking advantage of low cost to gain high recognition from customers, and adjust our development strategy.

Can the new "big stall model" work?

In the face of market challenges, in May this year, Helen opened the first big stall store "Helen Siyue" in Lichuan, Hubei Province, focusing on the "big stall + small pub" model. But can the "Lichuan new model" help the company achieve "double leap over the small tavern and the traditional big stall"?

Looking back at the development process of Helens, from the first store of Helens, the customer base at that time was mainly aimed at foreign tourists and foreign students; by 2012, Xu Bingzhong, the founder of Helens, had a brand iteration on the company, expanding the target audience from foreign students to young consumers. Then in 2018, Helens abandoned the previous bar position and began to transform from the joining mode to the direct operation mode, and realized the all-directly operated pub at the end of March 2021, opening the route of pursuing super-cost performance. Helens' development strategy has been changing with the change of the environment.

Although Helens planned to "open 2200 stores by the end of 2023" in its prospectus, we can see that Helens did not continue to expand widely in the first half of 2022, with the company's network of pubs increasing from 782 at the end of 2021 to 846, with 133 new pubs and 69 closed pubs.

In this regard, Yu Zhen, chief financial officer of Helens, said that the closure of the relevant pub is due to the fact that the proportion of new stores opened in the company's second-tier cities is relatively high from 2021 to 2022. In the case of fierce competition from competitors in second-tier cities, some of our stores are located in some nooks and crannies. When we bring the business circle on fire, competitors choose more obvious places to open stores, which will divert us to a certain extent. Therefore, the company has made adjustments to stores that consume cash flow in the short term and whose recovery is not objective in the future.

At the interim results conference, Lei Xing, executive director and senior vice president of Helen Division, said that through these reflections, we have adjusted our development strategy in order to deal with epidemic prevention and control in first-and second-tier cities. This year, our new "Helen Shiyue" is mainly built for the sinking of the county market.

The new model of "Helen Siyue" is mainly reflected in three points: first, it has changed from direct operation mode to cooperative alliance, so as to better integrate local social resources; second, it has increased the category of barbecue and changed its name to "Dapai stalls". Expand consumer groups, but may also be less affected by the epidemic Third, we tend to take a better position, for example, from the previous nook and cranny to choosing the street shop on the first floor, upgrade and iterate the environment, and try our best to become a local landmark of the night consumption economy.

According to Frost Sullivan's calculations, the total number of pubs in China is expected to grow at a compound annual growth rate of 10.1% from 2020 to 2025. In terms of industry scale, it is expected that with the obvious increase in the income level of first-and second-tier stores, the infiltration and subsidence of the third-tier and lower markets will accelerate, and the Chinese market may expand to nearly 200 billion yuan in 2025.

Chinese pub market forecast in 2025

At the same time, with regard to Helen's new model, Guojin Securities issued a research report saying that Helen's "supply chain improvement + cost-effective products + social atmosphere building + brand potential energy accumulation" has formed a first-mover advantage in the pub industry. highlight operational strength in the sinking market. Lichuan new model to add barbecue, higher unit price, cooperate with landlords to reduce rental expenses, store operating profit margin is expected to be higher than the standard stores in the same city, optimistic about its ability to replicate and expand, and maintain the "overweight" rating.

In addition, according to China Merchants research data, "Helen Siyue" since its opening two months ago, Lichuan store average daily sales of more than 20, 000 yuan, of which barbecue and snacks accounted for nearly 10% and 20% of total sales, respectively, own drinks accounted for 40%.

Then, in the future, whether Helen can reduce costs and increase efficiency through the integration of the new strategic model, and bring sustainable performance growth by sinking the county-level market, "Investor Network" will continue to pay attention. (produced by thinking Finance) ■