Key points of investment:
The company announced its 2023 performance forecast, which fell short of expectations. The company expects to achieve net profit of 0.56 to 66 million yuan for the full year of 2023, and a loss of 280 million yuan for the same period last year, an increase of 25.5%-47.9% over the same period in 2019. The net profit loss for the fourth quarter of the single quarter is expected to be 574-15.74 million yuan, with a loss of 102 million yuan for the same period of the previous year, a sharp decrease over the previous year. After deducting non-net profit losses of 119 to 21.94 million yuan, a loss of 109 million yuan for the same period of the previous year, a sharp decrease over the previous year.
The desire to travel during the holidays is strong, providing demand for food and beverage consumption, and helping the restaurant industry recover strongly. Demand in the catering industry has been released significantly since 2023, and holiday travel continues to be popular, driving the growth of the service-oriented catering business. According to data from the National Bureau of Statistics, throughout 2023, the country's food and beverage revenue reached a record high of 5289 billion yuan, an increase of 20.4% over the previous year. The country's food and beverage revenue performance in the fourth quarter was impressive, with a year-on-year increase of 24.3%. According to holiday catering market research data conducted by the China Culinary Association, the revenue of catering companies surveyed during the Spring Festival/May 1/ Mid-Autumn Festival National Day in 2023 achieved a significant increase compared to the same period last year, rising 24.7%/149%/67.5% respectively.
Maintain integrity and innovate, and actively explore new markets for stores and products based on the three major Quanjude brand stores. In the catering sector, the company recreated the scenes of the three main stores, including the “China Yijie · Sky Courtyard” banquet restaurant at Heping Store, the “Central Food Ceremony” brand culture experience store, and the Wangfujing store's “Palace?” “Longfeng Chengxiang” themed restaurants, etc., continue to consolidate the profitability of the three major Quanjude brand stores. The company increased its market investment and actively opened a series of new image stores, such as Fengzeyuan and Sichuan Hotel, etc., to give full play to its brand and technical advantages, and maintain a good momentum. The company also actively promotes product innovation, caters to the consumption habits and youth trends of the Z era, insists on focusing on dishes, and continues to launch new menus and seasonal dishes.
Embrace the younger customer base and gradually improve the brand system. In the food sector, the company has stepped up product research and development efforts, promoted foodization projects for catering products in an orderly manner, and enriched the product matrix. The company continues to create popular products, gradually mass-produce hand-sliced roast duck 3.0, introduced more than 10 new refrigerated products, and launched the “Premium Family Feast” series of new Dragon Year Family Feast gift boxes near the Spring Festival. The company entered the snack food circuit with the new sub-brand “Zero Research Institute”, opening up a full range of “same frequency resonance” between long-established brands and post-90s and Gen Z consumers.
Investment analysis opinion: The structural adjustment of the company's dishes and stores is beginning to bear fruit. It is expected that it will continue to give full play to the advantages of long-established brands and achieve the collaborative development of catering+food+group meals. Due to rapid growth on the company's expense side, we lowered our profit forecast. We expect to achieve net profit attributable to mother of 0.63/1.04/149 million yuan in 23-25 years (previous value 0.90/1.45/180 million yuan), corresponding to 23-25 PE of 60/37/26 times. Based on PEG estimates from Comparable Company Tongqinglou, Guangzhou Restaurant, and Ajizoka Comparable Company, we gave the company a 24-year average PEG of 0.9 times, corresponding to a target market value of 5 billion yuan. The current market value corresponds to a 28% increase in market value, maintaining a “buy” rating.
Risk warning: food safety risks, increased competition in the prepared food industry, shortage of senior technical management personnel, etc.