Incident: Xiabuxiabu released its 2022 annual report. During the reporting period, the company achieved operating income of 4.72 billion yuan/ -23.1%, and Guimu's net loss was 350 million yuan/ +20.4%. In 2022, the company had 801/224 Xiabu/Minatominato stores respectively, opened 41/44 new stores, and closed 81/3 stores. The sales growth rate of the Xiabuxiabu/Minato store at the same store was -23%/-22%, and the store turnover rate was 2.0/1.9 times, 2.3/2.5 times last year. The customer unit price was 63.9 yuan/150.9 yuan, +2.2%/+7.3% over the same period last year. During the pandemic, the company actively promoted cost reduction and increased efficiency and continued to optimize the single-store model, incubated new brands while setting up overseas divisions to promote overseas expansion. Looking ahead to 2023, Xiabuxiabu stores will return to the pace of store expansion after adjusting and maturing, and the continuous increase in brand potential is expected to accelerate store expansion. As food demand picks up after the epidemic, the company is expected to achieve a significant recovery in performance.

Operating performance was in line with expected guidelines, and revenue declined slightly in '22 due to the pandemic. In '22, the company achieved revenue of 4.72 billion yuan/ -23.1%, and Guimu's net loss was 350 million yuan/ +20.4%. The decline in revenue was mainly due to the fact that stores were unable to operate for a long time due to epidemic prevention and control measures. The increase in Guimu's net profit loss was due to a decrease in revenue. Overall, operating performance was basically in line with expected guidelines. By brand, Xiabuxiabu/poo restaurant achieved revenue of 22.6/ 2.25 billion yuan, compared to -4.2%/-35.7%. Xiabuxiabu restaurant's revenue was rigid, while the revenue of Xiabuxiabu/, which focuses on the middle and high-end, was seriously affected by the epidemic.

Minyuan stores expanded steadily during the pandemic, and Xiabuxiabu store expansion is expected to resume in '23. In 2022, the company had 801/224 Xiabu/Minato stores respectively. The number of newly opened stores was 41/44 respectively, and 81/3 of the stores were closed respectively. The sales growth rate of the company's Xiabuxiabu/Minato store in the same store in '22 was -23%/-22%, mainly due to the impact of the epidemic. The turnover rate of Xiabuxiabu/Minato stores was 2.0/1.9 times, 2.3/2.5 times last year. The customer unit price was 63.9 yuan/150.9 yuan, +2.2%/+7.3% over the same period last year, mainly due to the increase in group buying business due to the pandemic. It is expected that in '23, Xiabuxiabu/rounding up 120/74 new stores, and will continue to explore smaller store space to improve efficiency and seize the South China layout in the Yangtze River Delta. At the same time, the goal is to set up a total of 26 stores overseas.

Gross margin remained flat in '22, and profitability declined slightly due to the relative rigidity of expenses. In 2022, the company's raw material costs accounted for 38.1% of revenue, the same as last year, and the gross profit margin of 61.9% was the same as last year, mainly due to the sharp drop in lamb prices and supply chain advantages. There was a slight increase in rates. The company's management/rent fee ratio in '22 was 32.9%/25.7%, compared to +3.1pct/+3.7pct, mainly due to the decline in revenue due to the pandemic and fixed expenses. The company's net interest rate to the mother in 2022 was -7% /-2.2 pct.

Xiabuxiabu's adjustments are coming to an end and there is strong brand momentum. The post-pandemic multi-brand matrix is expected to drive the release of performance. During the pandemic, the company actively promoted cost reduction and increased efficiency and continued to optimize the single-store model, incubated new brands while setting up overseas divisions to promote overseas expansion. Looking ahead to 2023, Xiabuxiabu stores will return to the pace of store expansion after adjusting and maturing, and the continuous increase in brand potential is expected to accelerate store expansion. As food demand picks up after the epidemic, the company is expected to achieve a significant recovery in performance.

Risk warning: The epidemic affected the recovery of passenger flow, the price of raw materials rose, the opening of stores fell short of expectations, and the same store continued to decline.