Company Overview
Taixing Group is a multi-brand casual dining restaurant group. In addition to the flagship brand “Taixing”, Taixing Group has rapidly expanded its brand portfolio through self-creation, acquisitions, and licensing since 2008, including 8 brands, including “Tea Tree,” “Dependable,” and “Minhua Restaurant,” attracting customer groups with different tastes. The company's restaurant network consists of 191 restaurants (181 self-operated and 7 franchised), of which 126 are in Hong Kong, 63 in the mainland, 1 in Macau, and 1 in Hong Kong. According to the Frost & Sullivan report, in 2017, the company ranked first in revenue of self-operated casual dining restaurants in Hong Kong, with a market share of 4%, and the market revenue of self-operated casual dining restaurants in mainland China ranked second, with a market share of 0.1%.
At FY2016-FY2018, the company's performance showed rapid growth, with revenue of HK$2,513 million, 2,771 million and HK$3.126 billion, CAGR 11.5%, and net profit of HK$197 million, 210 million and HK$305 million, respectively, and a CAGR of 24.44%. This is mainly due to the rapid expansion of the Hong Kong market. The number of new restaurants opened by Tai Hing in Hong Kong in the past three years was 17, 20 and 22, respectively. The company's operating profit margin showed a downward trend, with three years being 27.4%, 26.2%, and 24.1%, respectively.
Status and prospects of the industry
Driven by rising living standards and the growth of the tourism industry, Hong Kong's food service industry has maintained moderate growth. The scale in 2017 was HK$112.7 billion, and is expected to reach HK$134.8 billion in 2022, with a CAGR of 3.6%. Among them, casual dining accounts for 40.6% of the total industry size. Since tourists are the main reason for the increase in casual dining, Hong Kong's tourism industry is expected to continue to grow in 2017-2022. The CAGR for fast food and casual dining is 5.4% and 3.6%, respectively.
China's food service market has maintained rapid growth, with a scale of 3964.4 billion yuan in 2017, mainly benefiting from increased consumer purchasing power and an increase in dining out due to population urbanization. The scale is expected to reach 6388.1 billion yuan in 2022, with a CAGR of 10%. The self-operated casual dining market is highly fragmented and competitive, with only 0.7% CR5 in 2017.
Advantages and opportunities
It enjoys strong brand recognition in the Hong Kong and Mainland food service markets.
It has strong ability to develop brands and expand brand portfolios.
Highly standardized management, automated production and food manufacturing processes, and efficient management systems can support rapid large-scale growth.
We are fully prepared to seize the growth of the mainland food service market.
Weaknesses and risks
The business depends on market recognition of the brand, and damage to the brand image will have a major adverse impact on the company.
The risk of increased risk and uncertainties due to rapid expansion.
Fluctuations in food costs have a direct impact on profits and operating performance.
Risks associated with commercial real estate leasing.
Investment valuation
Based on the prospectus pricing (HK$2.80-3.80) and 2018 net profit (HK$304.9 million), the company's overall diluted price-earnings ratio in 2018 was 9.18-12.46 times, and the valuation was low (comparable peers: 22 times for everyone, 24 times for Xiabuxiabu, 10 times for Tang Gong China, and 81 times for Haidilao). Considering the company's leading position in the Hong Kong market, we gave the IPO a special rating of “5”.