【行业研究报告】九毛九-SSS rebounds in May and costs control pay off

MaintainBUYandraisedTPtoHK$21.30,basedon35xFY23EP/E(rolled
overfrom40xFY22EP/E).AfterhostingaNDRwiththeCompany,wearenow
factoringinthenegativesbytherecentCOVID-19outbreaksandlockdowns,but
stillmaintainBUYbecausewethinktheworstshallbeover,plusTaiEr’ssignificant
long-termpotential.Thestockistradingat28xFY23EP/E,vs5-yearaverageof
50xand44%FY21-24ENPCAGR.
SSSreboundedinMayvsApr2022.SSSrecoveryrate(vs2021)forTai
Er/JMJwereat61%/81%inMay,improvingfrom52%/74%inAprand
Er/JMJwereat61%/81%inMay,improvingfrom52%/74%inAprand
60%/80%inMar2022.Comparedto2019,SSSrecoveryforTaiEr/JMJ
wereat63%/71%inMay,vs51%/61%inAprand58%/62%inMar2022.
TaiErisheavilyimpactedas~11%/6%ofitstotalstoresarelocatedin
Shanghai/BeijingwhileJMJhasnone.JMJ’soutperformancewasalso
drivenbyitsstoreenvironmentandproductrevamps,inourview.
StaycautiouslyoptimisticonrecoverytrendafterJun2022.According
tomanagement,TaiEr’sSSSrecoveryrate(vs2021)couldhavebeenat
75%,iftheaffectedareas(e.g.Shanghai,Beijing,Tianjin.)wereexcluded.
Ontopofthis,wehaveturnedmorepositiveabout2H22E,thanksto:1)
quickrecoveryobservedinShenzhen(85%recoveryrate(vs2021)forboth
TaiEr/JMJinMay,2)steppingupinpromotionsinShanghai(e.g.enjoying
a20%upinfoodportionwiththesameprice)and3)lowbasein2H21.As
at13Jun2022,onlyfiveTaiErstores(outof367)havenotresumed
operation,eitherdine-inordelivery.
EvenwithoperatingdeleverageinMar-Apr2022,westillexpectprofits
in1H22E.WebelieveGPmargincanbestableduetopriceslock-inand
increaseduseofself-raisedbass(about5-10%cheapervssourcedoutside),
whilepricesofotherrawmaterialslikebeef,porkandingredientsareall
manageable.StaffsperTaiErrestaurantwasalreadydowntojust27inDec
2021(vs36beforeCOVID-19),butpressurewillstillbetheregivenno
layoffsin1H22E,eventhoughonlymin.wageswillbepaidforthoseinareas
affectedbyCOVID-19outbreaks.Dragsinrentalwillalsobetherebut
manageable,as60-70%ofnewstoressignedinrecentyearscouldenjoya
veryminimalbaserent,plustherisingmixofstoresinlowertiercities.Allin
All,weareexpectingNPmargintobeat5.2%in1H22E(vs7.1%in2H21).
MaintainBUYbutraisedTPtoHK$21.30.WecutFY22E/23Enetprofit
estimatesby29%/5%butraised24Enetprofitby4%tofactorin:1)COVID-
19outbreakin2Q22E,2)greateroperatingdeleverageand3)lowerminority
interests.WemaintainBUYbutraisedTPtoHK$21.30,basedon35xFY23E
P/E(rolledoverfrom40xFY22EP/E).