MITA SECURITIES Equity Research July 12, 2021 MITA SECURITIES Co., Ltd. Komeda Holdings Junichi Shimizu Chief Analyst, Head of Research TSE 1st Section 3543 Industry: Food service, wholesale, retail [email protected] June wholesale sales Update Rating Monthly data for June: neutral Komeda Holdings (3543) disclosed monthly data for June. Buy Wholesale sales to franchisees (same-store basis) were 108.2% YoY (same month last year Target price (JPY) 3,000 = 100%). The day-of-week effect is neutral. Wholesale sales to franchisees (same-store Stock price (JPY) (Jul 12) 2,084 basis) were 92.8% vs. June 2019, lower than 95.6% for May. As there were two less holidays Market cap (JPYbn) 96.1 than in June 2019, the impression is neutral. Considering the generally difficult operating Key changes environment in the restaurant industry in June, the company fared quite well, in our view. Rating No Target price No The cumulative wholesale sales to franchisees (same-store basis) for Mar-Jun Period (four Earnings forecast No months) were 128.7% YoY, and 96.8% vs. June 2019. Stock price (JPY) The total number of stores at end of June was 927 (+2 MoM). The company opened three 3,000 stores (Tokyo, Hyogo and Miyagi) and closed one store (Aichi). 2,500 2,000 Emergency measures for Tokyo: Business environment in July not much different from 1,500 June 1,000 500 The Japanese government re-imposed emergency measures on the Tokyo metropolitan 3543 JT Equity 0 government. The period is from July 12 to August 22. The Tokyo metropolitan government 3/20 6/20 9/20 1/21 3/21 6/21 1/20 2/20 4/20 5/20 7/20 8/20 2/21 4/21 5/21 11/19 12/19 10/20 11/20 12/20 has requested that restaurants that serve alcoholic beverages be closed in principle. Komeda's Coffee, which does not serve alcoholic beverages, is subject to the request for Source: Bloomberg Finance LP shorter hours until 8:00 p.m. This is the same as the request for shorter hours based on the Earnings "priority measures to prevent the spread of the disease" that was in effect until July 11. For IFRS 2/20 2/21 2/22E 2/23E 2/24E Sales JPYbn 31.2 28.8 33.6 36.4 39.6 the company, the operating environment in July should be almost the same as in June. OP JPYbn 7.9 5.5 7.3 8.1 9.0 Pre-tax Profit JPYbn 7.8 5.4 7.2 8.0 8.9 Komeda's Coffee is a business that does not rely heavily on sales during dinner hours, so NP JPYbn 5.4 3.6 4.8 5.4 6.0 the impact of the request for shorter hours will be smaller than for other restaurant EPS JPY 116.7 77.9 105.0 117.2 130.2 BPS JPY 720 755 821 887 955 formats. In addition, the ratio of stores in Tokyo to the total number of Komeda HD stores DPS JPY 51.0 39.0 51.0 62.0 68.0 PER x 15.7 24.4 19.5 17.5 15.8 is low at 8%. PBR x 2.5 2.5 2.5 2.3 2.1 Div. yield % 2.8 2.1 2.5 3.0 3.3 ROA % 6.5 3.5 4.4 4.8 5.2 ROE % 17.2 10.6 13.3 13.7 14.1 Source: Company data, Mita Securities Company profile Komeda HD, based in Aichi Prefecture, operates "Komeda's Coffee" through franchise system nationwide. The company has 914 stores at the end of February 2021 and is the largest full-service coffee shop operator in Japan. FY2/21 sales were 28.8bn yen. MITA SECURITIES Co., Ltd. / 3-11 Nihonbashi Kabuto-cho, Chuo-ku, Tokyo, Japan 1 PLEASE SEE APPENDIX FOR ANALYST CERFICITATION AND INPORTANT DISCLOSURES. Komeda Holdings (3543) July 12, 2021 Komeda Holdings monthly wholesale sales data Figure: Wholesale sales to FCs (same-store basis) Figure: Wholesale sales to FCs (all-store basis) Whosalesa sales to FCs (same-store basis) Whosale sales to FCs (all-store basis) 200 200 Same stores (vs. same month All stores (vs. same month 180 previous year) 180 previous year) Same stores (vs. same month 160 year before last) 160 All stores (vs. same month year before last) 140 140 120 120 100 100 80 80 60 60 40 40 2/16 8/16 2/17 8/17 2/18 8/18 2/19 8/19 2/20 8/20 2/21 8/21 2/16 8/16 2/17 8/17 2/18 8/18 2/19 8/19 2/20 8/20 2/21 8/21 Source: Company data, Mita Securities Note: Same month last year or year before last = 100 Source: Company data, Mita Securities Note: Same month last year or year before last = 100 Figure: Store count Total number of stores 1,000 950 900 850 800 750 700 650 600 550 500 2/16 8/16 2/17 8/17 2/18 8/18 2/19 8/19 2/20 8/20 2/21 8/21 Source: Company data, Mita Securities 2 Komeda Holdings (3543) July 12, 2021 Food service industry data Same-store sales (compared to last year or year before last) Figure: Family restaurants Figure: Sushi restaurants 120.0 140.0 110.0 130.0 100.0 120.0 110.0 90.0 100.0 80.0 90.0 70.0 80.0 60.0 70.0 50.0 60.0 40.0 50.0 30.0 40.0 4/19 7/19 10/19 1/20 4/20 7/20 10/20 1/21 4/21 4/19 7/19 10/19 1/20 4/20 7/20 10/20 1/21 4/21 Skylark Skylark Saizeriya Sushiro Sushiro Kura Sushi Kura Sushi Saizeriya Royal Host Royal Host Kappa Sushi Kappa Sushi Genki Sushi Genki Sushi Source: Companies data, Mita Securities Note: Solid line vs last yr, dotted line vs yr before last Source: Companies data, Mita Securities Note: Solid line vs last yr, dotted line vs yr before last Figure: Izakaya (Japanese style pubs) Figure: Chinese restaurants 110.0 120.0 100.0 110.0 90.0 80.0 100.0 70.0 90.0 60.0 80.0 50.0 40.0 70.0 30.0 60.0 20.0 50.0 10.0 0.0 40.0 4/19 7/19 10/19 1/20 4/20 7/20 10/20 1/21 4/21 4/19 7/19 10/19 1/20 4/20 7/20 10/20 1/21 4/21 Torikizoku Torikizoku SFP SFP Ohsho FS Ohsho FS Hiday Hidaka Hiday Hidaka Watami Watami Chimney Chimney Kourakuen Kourakuen Ringer Hut Ringer Hut Source: Companies data, Mita Securities Note: Solid line vs last yr, dotted line vs yr before last Source: Companies data, Mita Securities Note: Solid line vs last yr, dotted line vs yr before last Figure: Yakiniku (Japanese BBQ), steak Figure: Monogatari Corporation by division 130.0 140.0 120.0 130.0 110.0 120.0 100.0 110.0 90.0 100.0 90.0 80.0 80.0 70.0 70.0 60.0 60.0 50.0 50.0 40.0 40.0 30.0 30.0 20.0 20.0 10.0 10.0 0.0 0.0 4/19 7/19 10/19 1/20 4/20 7/20 10/20 1/21 4/21 4/19 7/19 10/19 1/20 4/20 7/20 10/20 1/21 4/21 Monogatari Corp (yakiniku) Monogatari Corp (yakiniku) Monogatari Corp Monogatari Corp Amiyaki Tei Monogatari Corp (ramen) Monogatari Corp (ramen) Monogatari Corp (okonomiyaki) Monogatari Corp (okonomiyaki) Amiyaki Tei PFS (Ikinari ! Steak) PFS (Ikinari ! Steak) Monogatari Corp (Yuzuan) Monogatari Corp (Yuzuan) Source: Companies data, Mita Securities Note: Solid line vs last yr, dotted line vs yr before last Source: Companies data, Mita Securities Note: Solid line vs last yr, dotted line vs yr before last 3 Komeda Holdings (3543) July 12, 2021 Figure: Coffee shops Figure: Hamburger shops 120.0 140.0 110.0 130.0 100.0 90.0 120.0 80.0 110.0 70.0 60.0 100.0 50.0 90.0 40.0 80.0 30.0 4/19 7/19 10/19 1/20 4/20 7/20 10/20 1/21 4/21 4/19 7/19 10/19 1/20 4/20 7/20 10/20 1/21 4/21 Komeda Komeda Doutor Coffee Doutor Coffee McDonald's McDonald's Mos Burger Mos Burger Source: Companies data, Mita Securities Note: Solid line vs last yr, dotted line vs yr before last Source: Companies data, Mita Securities Note: Solid line vs last yr, dotted line vs yr before last Figure: Curry, Beef bowl Figure: Set meal, Udon noodle 120.0 120.0 115.0 110.0 110.0 100.0 105.0 100.0 90.0 95.0 80.0 90.0 70.0 85.0 60.0 80.0 75.0 50.0 70.0 40.0 4/19 7/19 10/19 1/20 4/20 7/20 10/20 1/21 4/21 4/19 7/19 10/19 1/20 4/20 7/20 10/20 1/21 4/21 Ichibanya Ichibanya Zensho (Sukiya) Ootoya Ootoya Toridoll Toridoll Zensho (Sukiya) Yosihoya Yosihoya Source: Companies data, Mita Securities Note: Solid line vs last yr, dotted line vs yr before last Source: Companies data, Mita Securities Note: Solid line vs last yr, dotted line vs yr before last 4 Komeda Holdings (3543) July 12, 2021 Comparison of valuations with similar companies (reference) Figure: Comparison of valuations for food service companies Company name Ticker PX Mkt cap Net D/E Sales YoY EBITDA Mgn ROE ROE ROE PER PER PER PBR EV/EBITDA EV/Sales Div yield 1M 3M 1YR 7/9 JPYbn Last LTM LTM LTM Cur E Nxt E LTM Cur E Nxt E Last Cur E Cur E Cur E Chg Chg Chg KURA SUSHI INC 2695 4,155 172.0 -0.1 7.4 4.6 3.1 8.3 12.3 120.4 43.0 26.9 3.7 14.5 1.1 0.6 6.0 1.1 80.7 MCDONALD'S HOLDINGS CO JAPAN 2702 4,930 655.5 -0.2 2.4 14.8 12.7 11.4 10.9 30.8 30.7 28.9 3.7 13.2 2.0 0.8 -1.6 -3.1 -11.8 OOTOYA HOLDINGS CO LTD 2705 2,744 19.9 0.2 -34.3 -24.0 -203.9 NA NA NA NA NA 14.1 NA NA NA -3.3 5.1 -10.0 FUJIO FOOD GROUP INC 2752 1,283 57.2 3.6 -33.9 -12.3 -81.6 11.5 NA NA 123.4 33.8 15.9 NA 2.2 0.0 -6.3 -10.2 4.2 AMIYAKI TEI CO LTD 2753 2,907 19.9 -0.1 -18.3 -9.6 -2.5 2.0 NA NA 49.8 19.9 1.0 NA 0.5 0.0 -1.7 0.1 4.0 HIRAMATSU INC 2764 210 10.2 4.1 -36.6 -32.0 -79.3 NA NA NA NA NA 2.9 NA NA NA -3.7 33.8 27.3 PEPPER FOOD SERVICE CO LTD 3053 425 16.6 2.4 NA NA NA NA NA NA NA NA 28.1 NA NA NA -14.1 42.6 -15.0 ARCLAND SERVICE HOLDINGS CO 3085 2,216 73.3 -0.6 18.8 12.9 14.5 13.8 12.7 23.2 22.2 21.5 3.2 10.5 1.4 1.1 -3.9 -2.4 20.4 CHOUSHIMARU CO LTD 3075 1,137 16.5 -0.8 -1.6 3.7 5.6 NA NA 41.9 NA NA 2.3 NA NA NA -0.4 -9.7 9.7 DOUTOR NICHIRES HOLDINGS CO 3087 1,752 79.9 -0.3 -26.7 -4.8 -11.0 4.9 2.9 NA 16.5 27.7 0.8 7.4 0.5 1.4 1.9 2.7 5.2 BRONCO BILLY CO LTD 3091 2,357 35.5 -0.3 -27.8 0.2 -3.5 NA NA NA NA NA 2.1 NA NA 0.7 -4.8 -1.3 6.3 MONOGATARI CORP 3097 7,430 89.7 0.2 -8.4 8.5 7.8 15.4 NA 58.8 30.0 24.9 4.4 14.4 1.4 0.9 2.2 1.8 94.8 (TP 9,100 Buy) CHIMNEY CO LTD 3178 1,404 27.2 0.8 -67.8 -38.2 -94.9 NA NA NA NA NA 5.4 NA NA NA 2.6 10.2 16.4 TORIKIZOKU HOLDINGS CO LTD 3193 1,842 21.4 0.0 -40.8 -9.9 -39.3 NA NA NA NA 29.7 4.4 NA 1.0 0.0 -3.7 12.5 30.9 HOTLAND CO LTD 3196 1,311 28.2 0.6 -12.3 2.8 -8.1 15.3 NA NA 25.7 25.2 3.9 NA 1.0 0.4 -6.8 0.1 26.8 SKYLARK HOLDINGS CO LTD 3197 1,493 339.7 2.1 -27.6