UBS initiates coverage on DPC Dash stock with Buy rating

UBS initiated coverage on DPC Dash Ltd (HK:1405), Domino's Pizza's master franchisee in China, with a Buy rating and a HK$135.00 price target. The investment bank anticipates significant store expansion, projecting over 2,000 directly operated restaurants by 2027, up from 1,105 in March, which is expected to drive profitability through operating leverage. UBS forecasts a 30% adjusted EBITDA CAGR for DPC Dash over 2025-27, noting its current valuation of 16x 2026E EV/adjusted EBITDA is attractive compared to the global restaurant average of 17x with a 10% EBITDA CAGR, suggesting the market has overlooked the company's expansion potential and improved profitability.

Analysis

UBS has initiated coverage on DPC Dash Ltd (HK:1405), the master franchisee for Domino's Pizza in China, with a 'Buy' rating and a HK$135.00 price target. The core of the investment thesis rests on significant unit growth potential in what UBS identifies as an under-penetrated market. The bank projects an aggressive store expansion, forecasting DPC's footprint to grow from 1,105 restaurants as of March to over 2,000 by 2027. This expansion is expected to be a primary driver of profitability through enhanced operating leverage. Financially, UBS anticipates a 30% compound annual growth rate (CAGR) for adjusted EBITDA between 2025 and 2027. This growth outlook makes DPC's valuation appear compelling; it currently trades at 16 times its 2026 estimated EV/adjusted EBITDA, a discount to the global restaurant peer average of 17 times, which is projected to grow EBITDA at only 10%. UBS posits that the market has excessively focused on near-term same-store sales growth pressures, thereby overlooking the long-term value creation from store expansion and margin improvement, with media attention from entering new cities cited as a potential re-rating catalyst.

Key Decisions for Investors

• Investors with a long-term growth focus should consider DPC Dash, as its current valuation at 16x 2026E EV/EBITDA appears to undervalue its projected 30% EBITDA CAGR relative to slower-growing global peers.
• It is crucial to monitor the company's quarterly store opening rate and management commentary on operating leverage to ensure the expansion thesis remains on track towards the 2,000-store target by 2027.
• Consider the stock's potential for a valuation re-rating, and watch for catalysts such as increased media coverage from expansion into new Chinese cities, which could draw investor attention to the growth story.