20220325-招银国际-九毛九-09922.HK-A_resilient_Tai_Er_and_an_uprising_Song_Hot_Pot_8页_1mb

CMB International Global Markets | Equity Research | Company Update Summary

Core Content

This report provides an equity research update on Jiumaojiu (9922 HK), a company in the Greater China catering sector. The analysis includes financial performance, strategic initiatives, and valuation insights.

Main Points

Company Overview

• Jiumaojiu is a subsidiary of China Merchants Bank.
• The report maintains a BUY rating but cuts the target price to HK$17.83, a decrease from HK$19.67.
• The current stock price is HK$15.48.
• The stock has shown mixed performance over different timeframes:
  • 1-month: -13.2%
  • 3-months: +14.7%
  • 6-months: -32.3%
  • 12-months: -45.9%

Financial Performance (FY21)

• Sales: Increased by 54% YoY to RMB 4.2bn, inline with expectations.
• Net Profit: Surged by 174% YoY to RMB 340mn, slightly below CMBI's estimate by 6%.
• Seat Turnover: Declined to 3.4x (from 3.8x in FY20), while ASP remained flat at RMB 80.
• SSSG: 5.7% in FY21.
• Store Level Operating Profit Margin: Improved to 21.8% (from 18.5% in FY20).

Strategic Initiatives

• Target for FY22E: Add 150 new Tai Er stores, with a focus on format differentiation.
• Store Expansion: New stores in T2/T3 cities will make up ~30% / ~40% of the total, compared to ~40% / ~50% / ~10% for current stores.
• New Store Formats: Include larger stores in lower-tier cities, simplified menu stores at transportation hubs, tea drinks shops, and stores with more SKUs like the Tai Er Legend.

Sub-brand Performance

• Song Hot Pot: Management is more confident in its product quality, brand image, and store format. It is expected to attract young customers.
• Lai Mei Li: Still in the early stages, with management focusing on perfecting product quality.

Earnings Revisions

• Revised FY22E/23E EPS estimates down by 10% / 10% due to:
  • Covid-19 outbreak in 1Q22E.
  • Greater operating deleverage.
• Revenue estimates for FY22E and FY23E are RMB 5,792mn and RMB 7,646mn, respectively.
• Net Profit estimates for FY22E and FY23E are RMB 536mn and RMB 773mn, respectively.
• Diluted EPS estimates for FY22E and FY23E are RMB 0.369 and RMB 0.532, respectively.

Valuation

• P/E Ratio (FY22E): 34.7x, lower than the 5-year average of 50x.
• P/B Ratio (FY22E): 4.7x.
• Yield: 0.6%.
• ROE: 14.5% in FY22E.
• Net gearing: Net cash for all years.
• Valuation Comparison: The company is compared with peers such as Haidilao (6862 HK), Nayuki (2150 HK), Cafe De Coral (341 HK), and others.

Key Information

Revenue and Net Profit Growth

Earnings and Margin Analysis

• Gross margin has been improving from 62.1% to 64.2%.
• EBIT margin has been declining from 18.0% to 17.4%.
• Net profit margin has been decreasing from 10.2% to 9.3%.

Earnings Revision Comparison

Conclusion

Jiumaojiu remains a strong player in the catering sector, showing resilience and significant long-term growth potential. Despite the challenges posed by the Covid-19 outbreak, the company is expected to recover, with a focus on store expansion and format diversification. The BUY rating is maintained, but the target price has been adjusted to HK$17.83. The company's financial metrics and strategic moves suggest a positive outlook, although the impact of the pandemic and operating costs remain key factors to monitor.