Core views:

The Tongqinglou brand was founded in 1925 and is an old Chinese brand recognized by the Ministry of Commerce. The company has formed a catering+hotel+food three-wheel drive business layout. As of 24H1, the company has 118 direct-run stores, and is the hidden champion of regional banquets in Anhui and Jiangsu.

High-quality card slots are just needed on racetracks and economically developed regions. The banquet circuit where the company is located is a low-frequency consumer, and the operation is more resilient. The company's net interest rate has fluctuated less than other catering companies since '19, and has always been at a relatively leading level. The company's stores are mainly concentrated in Anhui and Jiangsu regions, where the economy is relatively advanced. Strong consumption capacity can guarantee demand to a certain extent, and has continued to accumulate brand awareness, word of mouth and customer resources in the region after years of intensive cultivation. The company is the leading banquet company in Hefei, with the leading number of stores. We estimate that Tongqing Building has a market share of about 12%-14% for weddings in Hefei. It is well known, but there is still room for further penetration.

Refined and standardized operations create moats. The company has established a complete management system from the front-end supply chain to the kitchen and store services. Every operation process is finely controlled, and the standardized system can also be replicated in every store to ensure the export of uniform and high-quality products and services.

In addition, the accumulation of years of operating experience has also enabled the company to cope with various unexpected situations in complex banquet processes and ensure that products and services are in line with local consumption habits.

In recent years, it has concentrated on opening large stores in Fumao, and it is expected to release greater flexibility after the climbing period. By the end of '24, a total of 10 Fumao hotels are expected to open. Referring to Fumao Binhu's annual revenue of about 0.3 billion yuan and a net interest rate of about 20% during the maturing period, Fumao stores are expected to contribute a considerable increase in performance after the climbing period.

Profit forecast and investment advice: The company's net profit to mother is expected to be 0.15, 0.3, and 0.42 billion yuan respectively in 24-26. The banquet circuit has high barriers (heavy investment+scarce properties+difficult management), relatively few competitors, and strong immediate requirements. The company has been deeply involved in the regional banquet market for many years. In recent years, it has concentrated on opening large stores with high-quality properties. Binhu Fumao has basically verified the superiority of the Fumao model. In the future, stores will have considerable performance flexibility after climbing and maturing. Referring to comparable companies, give the company 25 years and 24 times PE, corresponding to a reasonable value of 27.41 yuan/share, and give it a “buy” rating.

Risk warning: macroeconomic fluctuations, store expansion and climbing falls short of expectations, food safety risks.