Jiu Mao Jiu (09922.HK): The profitability of hot pot is expected to reach an inflection point

國信證券 ·  03/13  · Researches


The company issued a profit warning, with an estimated revenue of 4.18 billion yuan in fiscal year 2022,-4.2% year-on-year, and a return profit of more than 47 million yuan,-86.2% year-on-year.

Guoxin social service point of view:

1) 2023 is the year when the scale of the hot pot brand is expanding and the profit is getting better. Hot pot is a Chongqing hot pot brand incubated by Nine Maojiu Group, focusing on young people. The first store opened in August, 2020, with a unit price of about 150RMB per person. At present, there are a total of 29 stores in China, and the regional layout is mainly in South China (20 stores in Guangdong Province). The turnover rate of 2020-2022H1 is 2.6pm, 2.5x2.4 respectively. Considering the pace of endogenous development and the experience of stones from other mountains, we judge that 2023 will be a year of hot pot expansion + profit inflection point getting better:

From the perspective of endogenous incubation rhythm, the resource-talent reserve of Taier-Northwest cuisine brand in the business circle is the basis for the success of hot pot incubation, and chafing pot is also engaged in the business of young people and has a high degree of reuse with Taier brand. The company's brand incubation path is "model grinding-positioning and packaging-scale expansion". We believe that hot pot has basically completed the first two steps of brand incubation, that is, the single-store model is basically stereotyped (400mm, low SKU, rapid menu iteration), and the entrepreneurial team has held a 15% stake in the brand to achieve interest binding; the brand image is stereotyped as a hot pot for young people & Happy Manufacturing Factory, and customer portraits are dominated by young people. Summing up the above, we judge that hot pot will enter the stage of "scale expansion", and the number of stores is expected to double to 60 in 2023.

According to the experience of the Stone of other Mountains, the number of stores opened in May 2016 has doubled from 2017 to 2019, and the operating profit has reached 10% in 2018. Banu Hot Pot made its first store in January 2007, and the number of stores exceeded 40 + in 2018, bringing the total number of stores to 88. We judge that the development pace of hot pot should be faster than that of Banu hot pot and match the brand with the brand of listed company groups. It has been nearly 2.5 years since the first hot pot store, and 2023 is expected to be a year of profit-expansion inflection point, according to the incubation pace of hot pot.

Single-store model-space: we believe that the hot pot single-store model is becoming more and more stable, and the net profit margin of mature stores is expected to reach 8% at this stage, and there is still room for optimization in the future model. Considering brand operation efficiency & brand positioning, the number of brands will reach 500 in mid-2026.

2) Stock brand: Taier's leading position is stable, and its profitability is expected to be stable. From 2019 to 2022, the market share of Taier in the Top20 Boiled Fish with Pickled Cabbage and Chili brand ranked first in the dinner series, reaching 8.2%, 9.6%, 9.2% and 8.7% respectively. Boiled Fish with Pickled Cabbage and Chili's leading position in the track was solid, and there was no large-scale dinner Boiled Fish with Pickled Cabbage and Chili competitor. At present, there are 458 Taier stores and 120 new stores will be opened in 2023, of which overseas markets will be the focus of expansion in 2023. Taier single store revenue is expected to return to 90% in 2019, but single store profitability is expected to be stable under cost leverage optimization.

3) risk hints: the epidemic repeatedly disturbed the operation; the recovery of passenger flow after the epidemic was not as expected; the competition in Boiled Fish with Pickled Cabbage and Chili industry intensified; the incubation progress of new brands and grilled fish brands was lower than expected; the controlling shareholder-management reduction; food safety issues.

4) Investment advice: from January to February, the company's Taier / 99 same store respectively returned to 101% Universe 97% in the same period last year. Some investors believe that the pace of recovery is slightly lower than expected, and the industry recovery caused by superimposed domestic flu is facing uncertainty. Therefore, the company's short-term trend is relatively under pressure. However, we believe that the core brand Taier store model cost leverage optimization, profitability is expected to be stable, and Boiled Fish with Pickled Cabbage and Chili track leading position is still stable. At the same time, the tempo of hot pot shop expansion has accelerated marginally and the profit inflection point has arrived. Based on the bullish view of the hot pot brand, we expect the company's homing performance in 22-24 to be 0.47pm 6.94 / 1.112 billion yuan (originally 3.27pm 708pm 1.019 million yuan). In 23 years, we expect a moderate recovery with a slight decline in performance. In the past 24 years, considering the hot pot volume drive and raising the performance forecast), compared with the same period last year, the year-on-year result is-86.1% "1366.7%" (60.2%), and the corresponding PE valuation is 475x32pm (0.48x0.76). We expect that the runner of the model will greatly strengthen the company's multi-brand growth logic, temporarily giving PE ~ 30x in 2024, corresponding to the target market value of 37.9 billion Hong Kong dollars (33.4 billion yuan), compared with the current market value space of 50.1%, maintaining the "buy" rating.

Risk hint

The epidemic repeatedly disturbed the operation; the recovery of passenger flow after the epidemic was less than expected; Boiled Fish with Pickled Cabbage and Chili industry competition intensified; new brands, grilled fish brand incubation progress was lower than expected; controlling shareholder-management reduction; food safety issues.

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