Goldman Sachs raises Busy Ming/Wanchen earnings forecasts and reiterates Buy ratings on the two value retail leaders

Overview

This is a Goldman Sachs preview and earnings upgrade report on the 1H26/2Q26 results of Chinese value retailers Busy Ming Group and Fujian Wanchen Food. The report's core conclusion is that although the two companies' share prices have rebounded 29%/18% from recent lows, they remain approximately 15% below their mid-May highs, and their risk-reward remains attractive, supported by store expansion, resilient per-store GMV, franchisee returns and margin expansion.

Core views

Goldman Sachs is positive on the continued market-share gains of value retail leaders. On the one hand, store expansion is faster than expected, with monthly gross store openings accelerating to more than 1,000 in May-June. On the other hand, 1H26 per-store GMV remained positive, supported by the Chinese New Year peak season, improved same-store sales, better site selection and a low base. The report believes the industry's long-term total serviceable store opportunity remains large, and that the leaders could increase their combined CR2 share to 80% in 2026 through network scale and store-management advantages.

Analysis framework

The report analyzes store tracking, per-store GMV/SSSG trends, unit economics, margin decomposition and a relative valuation framework. Earnings upgrades are primarily driven by higher year-end store-count assumptions, gross-margin and expense-ratio improvements from scale effects, and better supply-chain and logistics efficiency. Target prices are based on 2027E target P/E multiples discounted to mid-2027, with reference to global value retail peers' valuations.

Methodology notes

• Valuation methodsTarget P/E methodology

  Multiply 2027E EPS by the target P/E and discount to mid-2027

  Busy Ming's HK$581 target price is based on a 21x target P/E and a 9.4% cost of equity; Wanchen's Rmb324 target price is based on a 19.6x target P/E and an 8.2% cost of equity, with a high-single-digit valuation discount applied relative to Busy Ming.

• Operating analysisStore network and per-store GMV framework

  Store-count expansion, per-store GMV, same-store sales growth and franchisee returns jointly determine revenue and the sustainability of expansion

  The report assesses expansion quality through monthly store-opening tracking, the proportion of openings in strong regions, penetration of underserved lower-tier markets, franchisee gross margins and an approximately two-year payback period.

• Industry concentrationCR2 share expansion framework

  Leaders gain share from regional small players through scale, site-selection and supply-chain advantages

  Goldman Sachs expects Busy Ming and Wanchen's combined market share to rise to 80% in 2026, up from more than 70% in 2024-2025.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Busy Ming Group (1768.HK)

  Core covered stock, Buy rating, HK$581 target price

  Strengths

  Faster-than-expected store expansion, resilient per-store GMV, procurement and logistics scale effects, and approximately 25% 2026-2028E adjusted net profit CAGR.

  Weaknesses

  Higher store density may lead to per-store GMV dilution and regional cannibalization, while 2H26 per-store GMV growth may slow as the base rises.

  Comparison

  2027E target P/E of 21x, with reference to global value retail peers including Dollar General, Dollar Tree, Ryohin Keikaku and Pan Pacific International Holdings.

  Risks

  Intensifying competition, price investment, network density and self-cannibalization, franchise-model risks, and supply-chain/food-safety/logistics risks.

• Fujian Wanchen Food (300972.SZ)

  Core covered stock, Buy rating, Rmb324 target price

  Strengths

  Approximately 4,700 gross store openings in 1H26, a high proportion of openings in strong markets, and expected 2026E sales/pre-MI net profit/net profit growth of 37%/65%/93%.

  Weaknesses

  Slightly weaker network expansion momentum and unit economics than Busy Ming, with earnings more dependent on a combination of small brands and private-label products.

  Comparison

  2027E target P/E of 19.6x, with a high-single-digit discount relative to Busy Ming, referencing the historical valuation gap between DLTR and DG.

  Risks

  Market competition and price sustainability, complexity of franchise-model expansion, M&A risks, and supply-chain/food-safety/logistics risks.

Key data

• Busy Ming 1H26 growth forecastSales growth of 54%; adjusted net profit growth of 98%Driven by store expansion, resilient per-store GMV and operating leverage.
• Wanchen 2Q26 growth forecastSales growth of 41%; pre-MI net profit growth of 102%Goldman Sachs expects 2Q26 to continue to reflect strong store expansion and earnings elasticity.
• 1H26 gross store openingsApproximately more than 4,500 for each company; approximately 4,700 for WanchenWanchen's 1H26 gross store openings have already exceeded its full-year 2025 level.
• Industry store opportunityApproximately 68,000 stores by end-2026; approximately 80,000-81,000 by 2028E; more than 100,000 over the long termThe report believes the industry still has ample room for penetration and category expansion.
• Busy Ming earnings upgrade2026-2028E sales raised by 2%-10%; net profit raised by 6%-13%Year-end store-count forecasts are raised by 10%-14%, while incorporating approximately 3% dilution in per-store GMV.
• Wanchen earnings upgrade2026-2028E sales raised by up to 9%; earnings raised by 2%-11%Year-end store-count forecasts are raised by 7%-16%, but the per-store GMV dilution assumption is higher.
• 2026E marginsBusy Ming adjusted net margin of 4.6%; Wanchen pre-MI net margin of 5.7%Up 0.5 percentage points/1.0 percentage points year over year.
• Valuation comparisonBusy Ming/Wanchen trade at 17x/14x 2026E P/ECorresponding to 2026-2028E net profit CAGRs of 25%/21%.

Impact & implications

The report's investment implications are positive: the value retail industry does not rely solely on low-price competition. Leaders can sustain franchisee returns and continue increasing penetration in lower-tier and underserved regions through procurement scale, logistics efficiency, store management and category expansion. If store health and per-store GMV remain resilient, current valuations still have room for re-rating relative to medium-term earnings growth.

Risks

• Intensifying competition and price investment may compress gross margins and franchisee returns.
• Higher store density may lead to self-cannibalization and per-store GMV dilution.
• The franchise model carries management-complexity and execution risks during rapid expansion.
• Supply-chain, food-safety and logistics issues may affect brand trust and operating efficiency.
• After the base rises in 2H26, per-store GMV growth may slow sequentially versus 1H26.
• Wanchen faces risks related to M&A integration.

What to watch

• Whether the pace of store expansion can be maintained in 2H26 without harming per-store GMV and franchisee profitability.
• Performance of new stores in strong markets and underserved lower-tier markets, store-opening subsidy discipline and the competitive environment.
• The contribution of new categories such as cold-chain and chilled/frozen products to GMV and gross margins.
• Whether Busy Ming and Wanchen's actual 1H26/2Q26 results meet Goldman Sachs' forecasts.
• The pace at which industry store count progresses toward 68,000, 80,000 and ultimately the long-term opportunity of 100,000 stores.
• Whether procurement scale, logistics optimization and expense-ratio improvements can continue to drive margin expansion.