China Consumer Staples Value Retailers Competition Analysis

Goldman Sachs reiterates Buy ratings on Chinese value retailers Busy Ming and Wanchen, viewing the recent share price pullback as an overreaction to localized subsidy competition.

Key Takeaways

• 1.The current round of franchisee subsidies is localized and store-specific ('one store, one policy'), targeted at specific high-competition zones rather than broad-based national wars.
• 2.The industry Total Addressable Market (TAM) remains vast, with potential for up to 100k stores compared to the current count of less than 60k.
• 3.Earnings risks from the new subsidy structures are manageable, with sensitivity analysis suggesting only a 0.2pp to 0.3pp impact on net profit margins.

Table of Contents

• Store opens/subsidy sensitivity
• Evolution of Subsidy Policies
• What F&B brands are telling us about their operation?
• Price Target Risks and Methodology - Busy Ming Group
• Price Target Risks and Methodology - Fujian Wanchen Good
• Disclosure Appendix

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