【行业研究报告】九毛九-Post pandemic margin recovery is the key

23Mar2023
CMBInternationalGlobalMarkets|EquityResearch|CompanyUpdate
Jiumaojiu(9922HK)
Postpandemicmarginrecoveryisthekey
MaintainBUYandraisedTP,giventhesolidsalesrecoveryandhopefully
meaningfuloperatingleverageinFY23E.However,duetoitsricherthanpeers
valuationitisnotourtoppickinthesector.
FY22resultsinline.Jiumaojiu’ssalesdroppedby4%YoYtoRMB40.0bn
andnetprofittankedby85%YoYtoRMB49mninFY22,inlinewiththeir
andnetprofittankedby85%YoYtoRMB49mninFY22,inlinewiththeir
profitwarning.Suchasharpdrop,inourview,wasmainlydueto:1)
operatingdeleverageduringthepandemicin4Q22and2)activecutinASP
toremainvalueformoney.
WeexpectdecentsalesandmarginrecoveryforTaiErinJan-Feband
FY23E.Withoutthepandemic,atypicalTaiErrestaurantshouldgenerate
aroundRMB10mnsalesandhasa22%to25%restaurantlevelOPmargin.
Thankstoaseriesof“costreductionsandefficiencyimprovements”carried
outinFY21-22,suchas:1)investmentsinsupplychainandrawmaterial
production,2)rigidcontrolonrentaltermsnegotiation,3)moreagilestaffing
andshiftscheduling,and4)cutinnon-essentialexpenses,webelieveunit
economicscanimproveevenfurther.SinceSSSforTaiErinJan-Feb2023
hasalreadyreached101%(vs2022level)orabout92%(vs2019level,
CMBIest.),webelievethattherestaurantlevelOPmarginmayrecoverto
about20%orevenbetter(vs21%inFY19).Moreover,asofflinecatering
demandcontinuestostrengthen,weseeroomforTaiErtoraiseitsASP
again,whichshouldbepositivetoitsGPmargin.
TaiErwillopenabout120storesinFY23E,ofwhicharound15willbe
overseas.Accordingtomanagement,salesperstoreinplaceslike
SingaporeorMalaysiaareexceptional,whichcouldbeafewtimesgreater
vsatypicalstoreinmainlandChina.
SongHotpotexpansionisabouttoacceleratewithquality.Management
istargetingabout25newstoresforSongthisyear(vsjust27storesasat
FY22),andtheybelievethebrandmomentumwillstillbeonanuptrendin
FY23E-24E.Initially,SongHotpothasalwaysbeenpopularinSouthern
Chinabutitappearsnottooamazinginotherareas.However,aftercertain
refinementandrampup,itsperformanceisnotjustleadinginBeijing,but
alsoinShanghai,whichisakindofrecognitionasitisoneofthemost
competitivemarketsinChina.
MaintainBUYandraiseTPtoHK$23.52.OurnewTPisbasedon35x
FY24EP/E(rolledoverfrom40xFY23EP/E,duetotheturnaroundhead).
Wefine-tunedournetprofitforecastsby+3%/-4%inFY23E/24Etofactor
inbetterGPmarginandoperatingleveragebutaslowersalesrecovery.