China Staples Value Retailers Market concerns overdone

Equity Research 23 July 2026 | 10:32PM HKT

Value Retailers: Market concerns overdone; strong store expansion with healthier closure ratio/resilient SSSG; Reiterate Buy

Following recent market concerns about store open cadence and subsequent share Leaf Liu | price volatility in the value retail/snack discount sector today, we reiterate our BUY Goldman Sachs (Asia) L.L.C.

ratings on industry leaders Busy Ming and Wanchen. While short-term sentiment Christina Liu | has been impacted by concerns over normalizing store payback periods vs. rapid Goldman Sachs (Asia) L.L.C. store opening pace (Busy Ming Group (1768.HK): Total signed store exceeds 30k now Valerie Zhou | surpassing GSE store number for 2026), we believe that the structural transition of Goldman Sachs (Asia) L.L.C. the F&B retail channels actually favors the scale leaders, accelerating the exit of weaker regional players, and solidifying a profitable duopoly. GS: 1H26/2Q26 Preview expect strong Earnings Growth: We forecast 54% sales growth / 98% adjusted net profit (NP) growth for Busy Ming in 1H26, and 41% sales growth / 102% pre-MI NP growth for Wanchen in 2Q26, highlighting robust operational momentum and resilient fundamentals for the two sector leaders:

n Accelerated Store Expansion: Store openings in 1H26 have significantly outpaced expectations. Wanchen’s gross openings in 1H26 (c. 4,700+) have already exceeded its full-year 2025 level, while Busy Ming tracked at similar gross openings (compared to 1.5k/2.5k in 1H25). n Healthier store closure ratio vs. 2025: for both Busy Ming and Wanchen, we expect a lower store closure ratio in 1H26 vs. 1H25/2025 with focus on high-quality location selection and solid store UE (ie. less than 1% for Busy Ming based on beginning stores numbers on GSE for 1H26). n Resilient Same-Store Sales Growth (SSSG): Average per-store GMV remained positive in 1H26, supported by strong Lunar New Year (CNY) trading (high-single-digit % growth in Jan-Feb) and an easy comparison base from 1H25. Meanwhile, we expect both companies to continue prioritizing store health and franchisee margins, and category expansion/portfolio upgrades to support per-store GMV. n Healthy Unit Economics & Margin Expansion: Franchisee gross profit margins (GPM) remain stable or improved due to disciplined pricing. At the corporate level, procurement scale and logistics optimization are driving margin expansion, with 2026E adjusted NPM projected at 4.6% for Busy Ming (+0.5pp YoY) and pre-MI NPM at 5.7% for Wanchen (+1.0pp YoY).

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n Consolidating Duopoly: We expect the combined market share of Busy Ming and Wanchen to rise to 80% in 2026 (up from 70%+ in 2024–25), leveraging their scale to squeeze out smaller regional players.

n Busy Ming: 12x on 2027E (Adj NP at Rmb5.6bn on GSE); 15.8x on 2026E (Adj NP at Rmb4.3bn on GSE) n Wanchen: 10.9x on 2027E (NP at Rmb3.3bn on GSE); 13.8x on 2026E (NP at Rmb2.6bn on GSE)

Busy Ming Group (1768.HK): Total signed store exceeds 30k now surpassing GSE store number for 2026; structural growth and operating quality still under appreciated; Reiterate Buy

China Staples: Value Retailers 1H26/2Q26 Preview: Raise earnings on robust store open pace and resilient SSSG; Reiterate Buy

Fujian Wanchen Food (300972.SZ): Robust store openings and healthy per-store GMV growth YTD amid rational competition; Reiterate Buy - APAC Consumer & Leisure Corporate Day 2026 Takeaways

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