- We reiterate our OUTPERFORM rating and increase our target price (TP) for FRT by 2%. We maintain our view that the Long Chau (LC) pharmacy chain — which is FRT’s growth engine — is on track for a sustainable growth phase with improved profitability.

- Our higher TP is derived from increasing our valuation for LC’s equity by 4% as we raise our assumptions for blended sales per store and gross profit margin in 2031F (terminal year) by 18% and 100 bps vs our previous forecasts, respectively. This is partly offset by (1) decreasing FPT Shop’s aggregate 2022-2024F NPAT by 1%, (2) lowering LC’s aggregate 2022-2024F NPAT by 27% and (3) our increased risk-free rate and in turn cost of equity assumption by 50 bps.

- Downside risks: LC’s store rollout and profitability underperforming expectations; stiff competition from MWG, which is accelerating the expansion of its Apple authorized reseller format and pharmacy chains; worse-than-expected impact from inflation and/or an economic slowdown on discretionary spending.

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