Helens's (09869. HK)2022 earnings alert quick review

(1) Full-year operating loss is in line with expectations, but the considerable impairment & grant of SBC is more than expected, but basically no material cash flow outflow impact. The company's current book cash flow is expected to be the same as in the middle of last year.

(2) Helens's is expected to become the fastest repairing restaurant category by positioning itself in the four characteristics of the young audience, party scene, purposeful consumption, and cost-effective products. 2022 is expected to be a year of growth again after the total adjustment of the baggage.

1) Profit warning: 2022 revenue of 1.549~1.589 billion yuan, net profit loss of 1.313~1.673 billion yuan, adjusted net profit loss of 210~270 million yuan. Calculated, 2022H2 revenue 675~715 million yuan, net profit loss 1.009~1.369 billion yuan, adjusted net profit loss 110~170 million yuan.

(2) Adjusted profit: 2022H2 company adjusted net profit loss of 110-170 million yuan, the loss of business operations is slightly better than we expected (vs. CITIC forecast 2022H2 adjusted net profit loss of 200 million yuan). Due to the objective environment of the epidemic repeatedly exceeding expectations in the second half of the year, as well as the company's choice to actively silence some stores, the overall store statement caliber daily sales in the second half of the year is expected to be lower than the $7,200 level in the first half of the year. The gross margin in the year's second half is expected to be relatively stable, headquarters labor streamlining optimization obvious.

(3) by adjusting subject I: granting equity SBC costs, SBC 500 million yuan for the entire year of 2022 and 400 million yuan for 2022H2. Referring to the prospectus, the company reserved 47,652,017 restricted share units plan after the initial public offering before the listing, and 6,725,619 shares were issued in the year's first half. Assuming all previously reserved claims were published in the second half of last year, the corresponding grant price is around HK$10 at a relatively low share price.

(4) Adjusted Subject II: Assets and impairment losses, $600-900 million for the entire year of 2022 and $500-800 million for 2022H2. Impairment composition is expected to include three parts: 1) the closure of about 240 stores, resulting in a store closure accrual of 200 million; 2) more than 100 directly operated stores to partner stores, which is expected to be close to 200 million accruals; 3) the remaining 200 ~ 500 million is expected to be based on conservative principles for last year's more suspended operating stores brought about by the impairment accrual.

(1) store recovery: at the end of January, Helen Division is expected to be in operation in more than 200 stores. At the end of February, business stores reached 530, and the remaining 200 stores are expected to resume business in March. We hope the annual pace of store opening is lower than the previous year than last year, and the pivot is expected to be around 250 stores. New store openings are expected to accelerate in the year's second half.

(2) data recovery: 2023 Spring Festival seven days of business store's overall average daily sales is 131% of the same period in 2019 and 168% in 2022. January business store's overall daily sales are 125% of the same period in 2019 and 169% of the same period in 2022. According to the tracking since February, the operational data remain solid. The overall daily sales, or stay in the top 10,000, are expected to grow yearly relative to 2019.

3) Profit optimization: 2023 promotions strive to be more accurate, and gross margins are expected to increase. Personnel expenses are expected to be optimized due to the slimmed-down headquarters. The subsequent SBC is expected to decrease due to the issuance of equity reserved before the IPO.

4) The "more" model store: based on neutral and prudent assumptions, the partnership store steady-state daily sales of 12,000, OPM 25%, Hailun Division at 70% share, Hailun Division upfront investment of 700,000, spread over five years, income tax preferential tax rate of 15%, the final single store net profit apportioned to Hailun Division statement of about 500,000, not less than the net profit of directly operated stores.

(5) Store space: According to our previous calculations, combining the number of college students in each region (demand), the level of commercial rents in each city (supply), and the number of night-time economy supply (preference), we dynamically estimate that there are more than 3,000 stores, and there is still plenty of room from the ceiling.