Jiumaojiu has adjusted its menu to launch high cost-effective products, optimizing costs at both the store and headquarters levels. In addition, the new models of franchise stores and satellite stores are expected to contribute to additional growth once mature.
According to the financial news app "Zhong Tong Cai Jing", Guosen Securities released a research report stating that it maintains a "better than the market" rating for Jiumaojiu (09922). The firm stated that considering the company's 2024 PE dynamic valuation of around 20x, it is currently at its lowest position since listing. Recently, a series of domestic consumption promotion policies have been introduced, and if the subsequent turnover rate substantially improves, the company is expected to demonstrate strong profit elasticity under the leverage effect. Furthermore, the company's continued multi-brand incubation strategy is progressing steadily, waiting for the arrival of the profit inflection point. Despite the pressure on the operational side, the company's stock price has retraced by over 40% since the beginning of the year. However, similar efforts to adjust the menu to introduce high cost-effective products and optimize costs at both the store and headquarters levels have been observed. Additionally, the company's expansion of franchise stores and satellite stores, once matured, is also expected to contribute to additional growth.
Guosen Securities' main points are as follows:
Overview of operational data in the third quarter of 2024
1) The main brands are all maintaining steady expansion, with a high achievability of the annual expansion target. As of the end of the third quarter of 2024, the number of Tai Er/Song/Jiumaojiu stores was 654 (642 direct branches/12 franchises)/79/72 respectively. According to dynamic tracking by the firm, in the first three quarters of 2024, Tai Er/Song/Jiumaojiu respectively opened 68/24/4 new stores. Considering that the company has adjusted Tai Er/Song's full-year store opening plan to new openings of 93 (80 in mainland China and 13 outside mainland China)/25, in combination with the brand's seasonal store opening rhythm, the firm analyzed that the company's annual expansion plan has a high achievability.
2) Adhering to cost-effectiveness, the average customer spending slightly decreased month-on-month. In the third quarter of 2024, the average customer spending at Tai Er/Song/Jiumaojiu was 69/97/54 yuan respectively, with changes of 0/-7/-1 yuan compared to Q2. The decline in Song's average customer spending was more significant, mainly due to the increase in single-table dining during the summer.
3) The decline in same-store sales is stabilizing, with a slight increase in turnover rate. In the third quarter of 2024, the self-operated turnover rates at Tai Er/Song/Jiumaojiu were 3.6/3.0/2.8 times respectively, stabilizing compared to the second quarter (3.6/2.8/2.6 times). In terms of same-store sales, Tai Er/Song/Jiumaojiu recorded -18.3%/-32.5%/-10.3% respectively. The overall performance is still under pressure, but compared to the second quarter (-18.1%/-36.6%/-12.6%), the decline in sales is showing signs of stabilizing.
Optimizing the brand matrix, innovating store formats to seek additional growth.
In 2024, the company has respectively sold Nawei Dashi, a high-end Cantonese cuisine (gastronomy) brand, and three Lai Meili restaurants located in Mainland China (grilled fish brand). At the same time, in February, the company announced the opening of franchise business for Tai'er/Shan's mountain outside sour soup hot pot, focusing on the development of core brand portfolio. On July 30, Tai'er Sour Fish announced a strategic cooperation with Meituan, with Tai'er expected to open 50 brand satellite stores this year. According to Sina Finance, as of early August, Tai'er Sour Fish has opened more than 30 satellite stores in Guangzhou, Shenzhen, Shanghai, and Xiamen, among many other places, and plans to seek more suitable areas for the layout of such stores in the future. Tai'er's "satellite stores" are located on the street, with compact storefronts estimated to be 40-60 square meters, no dining area, only a takeaway shelf for takeaway couriers to pick up, expected to be a strong complement to traditional mall stores.
Risk Warning: Intensified industry competition, merger and acquisition integration risks, impairment of goodwill risks, slower-than-expected expansion speed, etc.
