瑞幸咖啡投资研究报告-雪湖资本2022.11

1 Luckin Coffee (LKNCY US) Full Investment Memo (FIM) Date: Aug 14, 2022 Share Price: US$14.52 Market Cap: US$4,609m 30/60/90 Days ADV (US$): US$31.5m/US$27.1m/US$23.7m Recommendation: Long Target Price: US$46.25 / Target Market Cap: US$14.7bn IRR (Aug 2022 – Dec 2023): 131% Table of Contents Disclaimer .............................................................................................................................................................. 2 Executive Summary .............................................................................................................................................. 3 Section 1: Company Background ........................................................................................................................ 7 Section 2: Industry Overview ............................................................................................................................ 15 Section 3: Core Thesis and Risks ...................................................................................................................... 17 Module 1: Incremental TAM (total addressable market) of coffee industry created by beveraged coffee 17 Thesis No. 1: Beveraged coffee enlarged coffee industry TAM significantly ............................................ 17 Thesis No. 2: The beveraged coffee category has more similar attributes as coffee and western QSR where leading brands take advantage of stable and loyal customer behaviors to build long-term moats and is less similar to the freshly made tea drink category. Luckin’s potential route of success in this category lies in attracting and retaining new beveraged coffee customers using its competitive strengths and converting them into loyal coffee drinkers ............................................................................................ 26 Module 2: Evolution of Luckin’s business model ............................................................................................ 32 Thesis No. 3: Evolution of self-operated store UE of raising sales volume and effective selling price at the same time, supported by attractive beveraged coffee products rather than discount ........................ 32 Thesis No. 4: The franchise model offers decent return to both franchisees and Luckin itself in lower tier cities; Luckin has the potential to further increase its gross profit sharing ratio with franchisees as the current franchisee return is above industry-average ............................................................................ 35 Thesis No. 5: The high Same-store Sales Growth (SSSG) from 2021 to 1H22 is expected to be normalized in the future and will mainly be driven by the increase in purchase frequency in the mid-to-long term .......................................................................................................................................................... 42 Thesis No. 6: Operating leverage of headquarter-level expe