Jiumaojiu released the 2023H1 results announcement:

In 2023, it achieved revenue of 2.88 billion/ +51.6%; net profit of 220 million/ +285.1%; adjusted net profit of 250 million/ +258.8%, and an adjusted net interest rate of 8.5%. The exchange loss due to the devaluation of RMB was approximately RMB 45.8 million, and net profit after addition was adjusted to the parent net profit of 280 million yuan/ +218.6%.

Comment:

Hot pot has performed strongly, and profit levels have been greatly optimized. On the revenue side, by brand, Taiji Restaurant's revenue was 2.190 million/ +47.3%, accounting for 76.0% /-2.2 pct; Hot Pot revenue was 350 million/ +331%, accounting for 12.3% /+8.0 pct; Jiumaojiu Restaurant's revenue was 320 million/ +1.8%, accounting for 11.0% /-5.4 pct.

The decline in the revenue share of Taiji and Jiumojiu is mainly due to the expansion of hot pot and Lai Mei Mei Grilled Fish. On the cost side, the cost of raw materials and consumables accounted for 36.2% /+1.3 pct of the company's revenue, mainly due to the growing share of food costs for hot pot and grilled fish; employee compensation accounted for 24.9% /-3.7 pct of the company's revenue; rent+discount to the company's revenue ratio was 14.0% /-3.3pct, and the decline in the share of manpower & rent was due to revenue growth. On the profit side, 2023H1's net profit to parent was 220 million/ +285.1%, adjusted net profit was 250 million/ +258.8%, and the adjusted net interest rate was 8.5% /+4.9 pct.

Operating profit was 575 million/ +106.8%, operating profit margin 20.0% /+5.3 pct, of which Taiji's operating profit was 467 million/ +91.0%, operating profit margin was 21.3% /+4.9 pct; Jiumaojiu's operating profit was 60.87 million/ +66.5%, and operating profit margin was 19.2% /+7.4 pct.

Taiji/Yai Hot Pot is steadily expanding, and Lai Mei's grilled fish is ignited and started. Store situation: 2023H1 Taiji/Chongqing Hot Pot Factory/Jiu Mao Jiujiu/Uncle Nao Wei is a master chef/Lai Mei Mei Grilled Fish opened 46/16/-1/0/4 stores respectively. The total number of corresponding stores is 496/43/75/1/6, respectively. Occupancy rate: Taiji/Chongqing Hot Pot Factory/Jiu Mao Jiujiu/ Uncle Nawei is a master chef/ Lai Mei's grilled fish turnover rate was 3.1/2.8/1.7/1.6/3.6, respectively, +6.9%/+16.7%/-5.6%/63.6%, respectively. The turnover rate of Taiji/Yai Hot Pot increased steadily, and Lai Mei achieved a leap forward.

Investment advice: Given the steady growth of flagship brands and the company's excellent ability to incubate multiple brands, we are optimistic about the growth prospects of the company's brand matrix. It is recommended to focus on Taiji's sinking expansion+encouraging hot pot volume, and focus on Lai Mei Mei's grilled fish store model mature/accelerated expansion+Jiumao Jiujiu store model optimization/restarting expansion in the medium to long term. In view of the significant benefits of policy opening for restaurant companies, the first half of the year was suppressed by the decline in macro-consumption power, and the peak season in the second half of the year accounted for a higher share. Against the backdrop of a recovery in consumption, the pace of store opening/single-store profit recovery accelerated. Moreover, if the RMB appreciates in the second half of the year, it is expected to generate exchange gains and hedge against exchange gains and losses in the first half of the year. We expect the company's net profit to be 5.6/87/1.07 billion yuan from 2023-2025, corresponding PE to 32/20/17 times, respectively. Give the company 25 times PE in 2024, corresponding to 22% growth space, and maintain a “buy” rating

Risk warning: food safety risks; opening stores not as fast as expected, etc.