Guosheng Securities: The same-store sales of Jiumaojiu (09922) decreased year-on-year, affecting the current performance, but still maintained a "hold" rating.

Guosheng Securities released a research report stating that JIUMAOJIU (09922) has been rated as "hold". Due to the current sluggishness of the catering consumer market, the company's same-store sales have declined, with relatively rigid cost and expenses. It is expected that the company's revenue will be 6.405/7.356/8.377 billion yuan respectively in 2024-2026, and the net profit attributable to the parent company will be 0.21/0.35/0.48 billion yuan respectively. As a leading Chinese restaurant brand management and operation company, the company has the ability to operate multiple brands and is continuously optimizing its brand portfolio. In the current environment, a more cautious expansion strategy is being adopted to strengthen the supply chain capacity, introduce franchising and cooperation models, reduce the negative impact of the environment on its own operations, and lay the foundation for future rapid expansion. Event: On August 23, the company announced its financial results for the first half of 2024. In the first half of 2024, the company's revenue was 3.064 billion yuan, a year-on-year increase of 6.4%, and the net profit attributable to the parent company was 0.072 billion yuan, a year-on-year decrease of 67.5%, with adjusted net profit of 0.077 billion yuan, a year-on-year decrease of 68.9%. Key points of Guosheng Securities are as follows: Cautious expansion of restaurant network, store operations under pressure from external environment. In the first half of 2024, the company further expanded its restaurant network, but overall it was relatively cautious, and there were greater challenges from the external environment, putting pressure on store-level operational indicators. 1) Taier: As of the first half of 2024, the number of restaurants reached 614, an increase of 118 compared to the same period last year. Among them, the number of restaurants in mainland China and other regions were 592 and 22 respectively, with an increase of 104 and 14 respectively compared to the same period last year. In the first half of 2024, the turnover rate of self-operated stores in general/China mainland/other regions were 2.7/2.7/3.3 times, a decrease of 0.4/0.4/0.6 times year-on-year; the table turnover rate were 3.8/3.7/4.7 times, a decrease of 0.5/0.5/0.8 times year-on-year; the average consumption per person were 71/66/163 yuan, a decrease of 4/7/9 yuan year-on-year. In the first half of 2024, the same-store sales of Taier self-operated stores decreased by 15.5% year-on-year, and the operating profit margin was 13.8%, a decrease of 7.5 percentage points year-on-year. 2) Song Hotpot: As of the first half of 2024, the number of restaurants reached 73, an increase of 30 compared to the same period last year. In the first half of 2024, the turnover rate/table turnover rate were 2.0/2.9 times, a decrease of 0.8/1.0 times year-on-year; the average consumption per person was 110 yuan, a decrease of 11 yuan year-on-year; the same-store sales decreased by 34.7% year-on-year, and the operating profit margin was 8.6%, a decrease of 5.1 percentage points year-on-year. 3) JIUMAOJIU: As of the first half of 2024, the number of restaurants reached 72, a decrease of 3 compared to the same period last year. In the first half of 2024, the turnover rate/table turnover rate were 1.8/2.8 times, an increase of 0.1/0.0 times year-on-year; the average consumption per person was 56 yuan, a decrease of 3 yuan year-on-year; the same-store sales decreased by 8.5% year-on-year, and the operating profit margin was 16.9%, a decrease of 2.3 percentage points year-on-year. The turnover rate and table turnover rate of Taier and Song Hotpot decreased year-on-year in the first half of 2024, mainly due to the decrease in customer traffic caused by external environment factors; the decrease in average consumption was mainly due to the company's consideration of market conditions and competition dynamics, as well as adjustments in menu structure and pricing. Same-store sales decline, combined with cautious provision of asset impairment, led to a slight decline in profits for the period. As the company's restaurant network is still expanding, with same-store sales declining, and relatively fixed costs like labor and rent, combined with a cautious provision for asset impairment, the net profit attributable to the parent company in the first half of 2024 decreased by 67.5% compared to the previous year to 0.072 billion yuan, with a net profit margin of 2.36%, a decrease of 5.36 percentage points compared to the previous year. In terms of specific expenses, in the first half of 2024, employee costs/depreciation of right-of-use assets/other rental and related expenses/ depreciation and amortization of other assets were 89.41/28.67/6.63/14.03 million yuan, an increase of 24.6%/26.1%/-1.2%/28.5% year-on-year; due to the company's consideration that the performance of some restaurants did not meet expectations, a cautious provision for asset impairment was made, leading to impairment losses on property, kitchen and equipment, as well as right-of-use assets increasing from 0.30 million yuan in the first half of 2023 to 39.40 million yuan in the first half of 2024. Continuously optimizing brand portfolio, enhancing supply chain capabilities, and accelerating expansion through franchising and cooperation models. 1) Continuously optimizing brand portfolio: While adhering to a strategy of operating multiple brands and concepts to expand into more segmented markets, the company continues to optimize its brand portfolio. In 2020, they launched Song Hotpot, and in February 2024, they launched a new brand, Shanwaimian. In the first half of 2024 and July 2024, they sold the brand of Uncle Nanwei Is a Chef and 3 Lovely Restaurants in mainland China. At the same time, they timely adjust the expansion pace according to market conditions, with the mid-2024 report revealing a revised expansion target of opening 25 new Song Hotpot restaurants in 2024, and opening 80/13 new self-operated Taier restaurants in mainland China/other regions respectively (as recently guided by the second quarter 2024 operations performance disclosure of 25 new Song Hotpot restaurants, 80-100 mainland China Taier directlyoperated stores, and 15-20 other regional Taier directly-operated stores). 2) Continuous enhancement of supply chain capabilities: The company has established a supply chain center in South China, and in the first half of 2024, has established a central kitchen in East China and a production plant for hotpot broth and compound seasonings in Southwest China, with the aim of continuously enhancing the supply chain capabilities to support the expansion of the restaurant network. 3) Franchising and cooperation models: On February 3, 2024, the company announced the launch of franchising and cooperation models for Taier and Shanwaimian. As of the first half of 2024, there were 2 franchised Taier restaurants and 3 cooperation-mode Shanwaimian restaurants, with the potential to accelerate the expansion of the restaurant network in the future. Risk warning: 1) Store expansion and management falling short of expectations; 2) Food safety issues; 3) Issues with franchisee management; 4) Continuous decline in customer spending and table turnover rates.