20220825-招银国际-九毛九-09922.HK-Re-opening,_margins___Song_are_key_drivers_9页_1mb

Jiumaojiu (9922 HK) Company Update Summary

Core Content

• Company Overview: Jiumaojiu is a leading catering company in China, with a focus on its Tai Er and Song Hot Pot brands. The company has shown resilience despite the challenges posed by the pandemic.
• Current Rating and Target Price: The company is maintained at a BUY rating, with a revised target price of HK$19.70, down from the previous HK$21.30.
• Performance Highlights: The stock is currently trading at HK$17.02, which is +15.7% below the target price. The company's 12-month price performance is -23.9%, with a relative performance of -2.0%.

Main Points

1. Financial Performance

• 1H22 Results:

  • Sales dropped by 6% YoY to RMB 1.9bn, affected by store openings and the pandemic.
  • Net profit fell by 69% YoY to RMB 58mn, in line with the previous profit alert.
  • Despite the challenges, Jiumaojiu is one of the few catering companies to maintain profitability.

• Key Factors for Profitability:

  • Rapid store openings.
  • Robust gross profit margin, supported by supply chain investments.
  • Effective cost control on staff and rental expenses.

2. Brand Analysis

• Tai Er:

  • Still leading in the market but affected by the Shanghai lockdown and reduced consumer spending.
  • Seat turnover dropped to 2.9x in 1H22 from 3.7x in 1H21.
  • Restaurant-level OP margin decreased to 16.5% from 23.4% in 1H21.
  • The brand is expanding into lower-tier cities with value pricing, which should yield better margins due to lower staff and rental costs.
  • The company reiterated its plan for ~120 new store openings in FY22E, and expansion is expected to be "stable" in FY23E-24E if the pandemic situation remains controllable.

• Song Hot Pot:

  • Showing strong growth with seat turnover improving from 2.2x in 1H21 to 2.4x in 1H22.
  • GP margin and profitability are climbing, reflecting its popularity and high demand.
  • The brand is expected to become a major growth driver in the near future, with potential for accelerated expansion in FY23E supported by the Tai Er team's experience.

3. Earnings and Profitability

• Earnings Revision:

  • Net profit estimates for FY22E, FY23E, and FY24E were revised down by 8%, 21%, and 7%, respectively.
  • Factors include the impact of the 2Q22E pandemic, slower recovery in SSS, and higher staff costs.

• Projected Earnings:

  • Revenue is expected to grow by 18% in FY22E and 35% in FY23E.
  • Net profit is projected to increase by 76.4% in FY23E and 53% in FY24E.
  • The company is expected to maintain a 34.6x P/E ratio for FY23E and 22.6x for FY24E.

4. Valuation and Comparison

• Valuation Metrics:

  • The current P/E ratio is 34.6x for FY23E, compared to a 5-year average of 50x.
  • The company has a 28% NP CAGR for FY21-24E.

• Peer Comparison:

  • Jiumaojiu is compared with other catering and consumer staples companies, such as Haidilao, Cafe De Coral, and Mengniu Dairy.
  • The company has a 1.6x PEG ratio, indicating a potential for growth.

Key Information

• Management Quality: Strong management has been a key factor in the company's resilience and profitability.
• Cost Control: The company has effectively managed staff and rental costs, contributing to its financial stability.
• Future Outlook: The expansion into lower-tier cities and the potential growth of the Song Hot Pot brand are seen as key drivers for future performance.
• Pandemic Impact: The pandemic has affected store expansion and sales, but the company's strong fundamentals suggest a recovery is on the horizon.

Conclusion

Jiumaojiu remains a BUY despite revised earnings estimates and a lower target price. The company's strong brand equity, cost control, and strategic expansion into lower-tier cities and the rising popularity of Song Hot Pot are key factors supporting this recommendation. The financial performance and valuation metrics indicate that the company is undervalued compared to its 5-year average P/E ratio and has significant long-term growth potential.