Helens reported 1H23 revenue of Rmb710m （-19% YoY）， and adjusted net profit of Rmb177m, higher than our expectation, mainly thanks to higher GPM. We raise 23E EPS forecast from Rmb0.24 to Rmb0.26, but lower 24E forecast from Rmb0.37 to Rmb0.34 （+32% YoY）， and lower 25E forecast from Rmb0.48 to Rmb0.40 （+20% YoY） on lower number of stores. We lower target price from HK$16.4 to HK$9.3, and with 15% upside potential, we maintain Outperform rating.
　　Declined store unit. In 1H23, the company opened 25 new bars and closed 139, bringing the number of bars to 653. As of August 25th, the number of bars reached 562, including 425 self- operated bars, 126 franchised bars, and 11 “HiBeer Partnership” bars.
　　“HiBeer Partnership” programme. The company started the franchised cooperation model since 2022, and launched the “HiBeer Partnership” programme in June 2023. The bars under the new model has low investment costs, low operating costs, high sales per square meter. As of August 25th, the company has signed contracts with over 80 partners and 11 bars have been opened through the new programme.
　　Increase in profit margin. 1H23 GPM increased by 6ppts YoY to 72%, mainly thanks to the increase in the proportion of sales of new self-owned spirituous drinks with high margin and a decrease in marketing activities resulting from the rebound of business. GPM of Helen’s branded alcoholic drinks increased by 0.7ppts to 79.4%, and GPM of third-party branded alcoholic drinks increased by 7.1ppts to 55.6%.
　　Maintain Outperform. We like the company’s brand power, and await for the further verification of the new model. We lower target price from HK$16.4 to HK$9.3, and with 15% upside potential, we maintain Outperform rating.
　　Risks: Lower-than-expected revenue recovery; increasing industry competition leads to lower margin.