Nine Maojiu (09922.HK): Optimistic about the brand's potential to stabilize and continue to recover; encourage the brand to prepare for development

中金公司 ·  03/22  · Researches

2022 results are in line with previous profit warnings

The company announced its 2022 results: revenue was -4.2% year-on-year to 4.01 billion yuan (Tai2 -5.6% year-on-year, -20.4% year-on-year, and other brands +129.7% year-on-year), and Guimu's net profit was -85.5% year-on-year to 0.5 billion yuan, mainly affected by the epidemic and exchange losses of about 80 million yuan. The performance is in line with the profit warning. At the end of '22, there were 450 Taiji companies (net increase of 100 in '22), 76 in Jiumaojiu (7 in '22), and 27 in Hotpot (net increase of 18 in '22). Taiji reversed seats 2.6 in '22, down from 3.4 in '21, revenue from the same store was -22.3%; nine maojiu turned 1.6, down from 1.9 in '21, revenue from the same store was -11.0%; and Hotpot turned 2.5 seats (same as the previous year), and the same store's revenue was +6.4%.

Development trends

They have shown resilience under the pressure of the pandemic, and they are optimistic about a sustainable recovery under the brand's potential to stabilize. Even under the influence of repeated epidemics and the peak of infections in '22, the operating profit margins of Taieru and Jiumaojiu's northwest cuisine restaurants reached 14.3% and 12.9%, and the resilience of the single-store model was prominent. We believe that the company partially offset negative environmental factors in terms of cost reduction and control fees in terms of raw materials (price-locked core raw materials at the beginning of the year, gross margin in '22 was +0.7ppt to 63.9% year-on-year) and labor (for example, the cost of outsourced employees increased from 2% in '21 to 22% in '22). Looking ahead to 23, we believe that the Taiji brand will remain stable, driving continued recovery and steady store opening: 1) In terms of same-store recovery, although the increase in the number of visitors returning to their hometowns during the Spring Festival has put some pressure on local consumption in high-tier cities (we estimate that stores in Taiji first-tier cities accounted for more than 30%), when compounded by the higher base in February '22, the cumulative number of same stores in Taiji 1-2 still recovered about 101% compared to January, and we estimate that the degree of recovery from February to 19 is basically the same as January; we are optimistic that the recovery in the same stores from February 19 is basically the same as January; we are optimistic that the recovery from consumer power has stabilized from January to January. sustainability. 2) In terms of opening stores, at the beginning of the year, the company directed Taiji to open 120 new stores in '23 (not including 13 that were renovated at the end of '22), and continued to lay out the supply chain for long-term store expansion: the company built supply chain centers in South China and North China, and initially planned to build additional Central Chefs in East China.

Encourage brands to get ready to go, and keep an eye on the progress of store opening, brand potential, and profit growth. In terms of opening stores, Guangzhou opened two hot pot restaurants on January 13. Subsequent store openings will include not limited to Shenzhen, Guangzhou and Kunming1. At the beginning of the year, the company instructed Hot Pot to open 25 new stores in '23 (the number of corresponding stores nearly doubled compared to the end of last year), and we are watching the progress of Hot Pot's opening. In terms of brand potential, even in '22, when the pandemic was heavily affected, Hotpot achieved +6.4% of the same stores, and actually opened more stores than previous guidelines (18 vs. 15), highlighting a personalized brand image on the fiercely competitive hot pot circuit, and brand potential gradually climbed. In terms of the single-store model, we estimate that in '22, a single store sold about 60,000 yuan a day for hot pot under normal operations; it is estimated that if overstaffing abates, it will boost single-store profits. In addition, laying out the supply chain ahead of schedule shows the company's confidence in opening a store:

In '22, construction of a hot pot seasoning and compound seasoning production plant and central kitchen began in the southwest region.

Profit forecasting and valuation

Considering the potential of stronger brands, the recovery is expected to continue. The 2023 profit was raised 11% to 650 million yuan, and the 2024 profit forecast was maintained at 1.06 billion yuan. The current stock price corresponds to 33/20 times P/E in 2023/2024. Maintaining an outperforming industry rating and maintaining the target price of HK$25.6, corresponding to 51/30 times P/E in 2023/2024, with an upward margin of 44%.


The pace or extent of recovery in consumption power fell short of expectations; Taiji's brand potential declined; new brand development was blocked.

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