What happened: Weiqian announced a growth rate of 9.6% for same-store sales in China and 8.4% for same-store sales in Hong Kong. Total sales of fast leisure restaurants rose 6.2% year-on-year, an increase of 3.8 percentage points compared with the second quarter.

Valuation and target price: taking into account the better-than-expected same-store sales growth rate and expense control, we raised our profit forecast for 13-15 years by 3.4%, 8.5%, 10.8%, to HK $0.26, 0.31, and 0.37, respectively. At the same time, the target price will be raised from HK $8 to HK $9.2. Our target price has 18% room to rise relative to the current share price, so we have upgraded our rating from neutral to overweight.

Key assumption: we increase the growth rate of same-store sales of Weiqian Restaurant in 13-15 from 5.5% to 6.5%, respectively, from 6.5% to 7.5% for Chinese mainland. We expect the company to open new stores in 13-15-10-50-60.

Different from the popular perception:

The growth rate of same-store sales in Chinese mainland and Hong Kong was slightly higher than expected. We believe that the acceleration of same-store sales growth in the Hong Kong market is mainly due to the improvement of brand mix, and the company has opened relatively high-end ramen brands Musashi and Sapporo in Hong Kong, which have been well received by customers. Due to inefficient store closures and a low base last year, we believe Chinese mainland's same-store sales growth will continue to record a steady growth rate.

Profit margins will continue to rise. Taking into account the reduction in promotional activities, we expect the overall gross profit margin to rise to 66.9% in the second half of 13 years from 67.5% in the first half of the year. Due to the closure of loss-making stores and operating leverage, we also expect operating margins to rise to 12.4% in the second half of the year, up from 11.1% in the first half.

The implementation of multi-brand strategy and mergers and acquisitions will become the catalyst for the rise of stock prices. Weiqian has upgraded its product portfolio in the Hong Kong market, and more high-end stores such as Musashi and Sapporo have opened to cater to the upgrading of shopping malls and resist rising rents, and we believe that the multi-brand strategy has achieved initial success in Hong Kong. The company recently opened its first Musashi store in Shanghai IAPM, marking the gradual implementation of the multi-brand strategy in the Chinese mainland market. We believe that the successful implementation of multi-brand strategy in the mainland will become a positive catalyst for stock prices. In addition, the company is already actively looking for acquisition targets to complement the range of products, such as Japanese coffee brands and bread brands, which will also be a positive catalyst for share prices if the acquisition is successful.

Catalyst: continuous improvement in the growth rate of same-store sales in China; accelerated growth in store opening; mergers and acquisitions with increased profits.

Risks: sharp increases in raw materials and rental costs; higher-than-expected losses and longer-than-expected equalization periods for new stores

A further decline in passenger traffic in shopping malls.