Incident: Jiumaojiu released its 2022 annual results, achieving revenue of 40.1 billion yuan in '22, -4.2% year on year; Guimu's net profit was 49 million yuan, -85.5% year on year. Among them, 22H2 achieved operating income of 2.10 billion yuan, or -2.5% year on year; the net profit of the mother was -0.08 billion yuan, -105.5% year on year. Profit is above the lower limit of performance guidelines.
Taiji's steady expansion of stores highlighted operational resilience, encouraging Hotpot to enter a period of accelerated store opening. Judging from the main operating data, in '22, Taier/ Jiumaojiu/yang/ other brands achieved restaurant revenue of 30.98/6.05/259/034 billion respectively, an increase of -5.70%/-20.30%/+196.78%/-23.86%, accounting for 77.3%/15.1%/6.5%/0.8% respectively.
1) Taiji: There was a net increase of 100 stores in '22, bringing the total number of stores nationwide to 450; the turnover rate was 2.6 per day, down from the turnover rate in '21 (3.4 times/day); the turnover rate was 3.5 times per day, down 0.9 times/day from '21 (4.4 times/day); the customer unit price fell slightly 3.8% year on year to 77 yuan. Due to repeated effects of the epidemic, Taiji's same-store revenue has declined. In '22, the Taiji brand achieved store-level operating profit of about 445 million yuan, with an operating profit margin of 14.3%, compared to -7.5pcts over the previous year.
2) The company continued to adjust its brand in '22 and shut down 7 stores throughout the year; the turnover rate was 1.6 times/day, down 0.3 times/day from the 21-year turnaround rate (1.9 times/day); the turnover rate was 2.4 times/day, down 0.4 times/day from '21; the customer unit price fell 6.8% year on year to 55 yuan. The operating profit margin of the Jiumaojiu brand in '22 was 12.9%, the same as in '21. The cost of nine maojiu was well controlled. After deducting the group's management fee amortization in '22, the brand was still profitable.
The Jiumaojiu brand is currently still in the upgrade stage. The company plans to open new stores and close inefficient stores in '23 at the same time. It is expected that the total number of Jiumaojiu stores will remain stable in '23.
3) Hotpot: 18 new stores opened in '22 (15 stores planned to open in '22, which exceeded expectations, mainly due to the popularity and word of mouth slightly exceeding expectations); the turnover rate was 2.5 times/day, the same as in '21; the turnover rate was 3.6 times/day, a slight increase over 21 years (3.5 times/day); the customer unit price dropped slightly by 0.8% year-on-year to 128 yuan. After the single-store model for hot pot went through, it has now entered a period of accelerated store opening.
4) Other brands: Lai Mei's grilled fish/Uncle Nawai's seat turnover rate was 2.7/2.0 times/day respectively, up 0.3/0.3 times/day over 21 years. A total of 25 stores of 2 egg brands have been divested.
The company's cost and expense structure was further optimized in 2022. The gross margin reached 63.9%, yoy+0.7pcts. The increase in gross margin was mainly due to supply-side optimizations such as self-production of perch and the construction of a central kitchen. The ratio of employee costs/rent costs to revenue was 28.3%/10.1%, respectively, +3.0/+1.9 pcts compared to the previous year. Taken together, the company's operating profit margin in '22 was 12.90%, yoy-6.5 pcts, and store operations were under pressure.
Taiji has officially set sail overseas, and the growth of hot pot is likely to accelerate. 1) Taiji: The Taiji brand will officially go overseas in '23, and the company will set up a special international division for operation and management. In 2023, Taiji plans to open 120 stores, including 105 in China and 15 overseas. Regarding Taiji's overseas store opening, the company plans to focus on developing places where Chinese people gather in the first phase, such as Southeast Asia, North America, East Asia, and Oceania, and estimates that the opening space for Chinese customers alone will be 150-200; in the second stage, the company plans to develop a local customer base. Judging from current research, the local market potential is huge. Judging from the revenue and profit scale of a single store, the revenue and profit of one Taiji International store in RMB is equivalent to the size of 2-3 domestic companies. Successful operation is expected to bring good reporting contributions to the company. 2) Hot Pot: The basic stage of incubating the Hot Pot brand has basically been completed, and now it is gradually entering the stage of scale expansion. The number of hot pot restaurants planned to open in 2023 is 25. The company believes that brand potential is more important than opening a store, and it is not ruled out to increase the number of stores opened after brand potential increases.
Looking at the opening space, the company expects Taiji to have around 1,000 stores and Hot Pot to have 300-500 stores. Looking at the single-store model, 1) Taiji: It is estimated that after consumption recovers, Taier's single store will have an annual revenue of 10 million yuan, a profit margin of 23% from store operations, and a payback period of 10 months. The break-even point will be around 6 million yuan per year. 2) Hot Pot: When corresponding to the scale of 300-500 stores, the revenue of a single Hot Pot Hot Pot store was about 20 million yuan, the profit margin of the store was 23%, the payback period was 10-12 months, and the break-even point annual revenue was about 12 million yuan. The actual revenue of Hot Pot in January-January '23 was better than the target single store's revenue.
Profit forecasts, valuations and ratings: We maintain the net profit forecast for 2023-2024 of $681/1,094 million respectively, and the net profit forecast for the year 25 introduced is $1,520 million. The current stock price corresponds to the 2023-25 PE of 33x/21x/15x, respectively. As a platform-based catering company, the company's brand matrix is continuously optimized and its operating capacity is gradually increasing. We are optimistic about the company's development potential and maintain the “buy” rating.
Risk warning: The epidemic has repeatedly exceeded expectations, the speed of opening stores has fallen short of expectations, and the progress of incubation of new brands has fallen short of expectations.