CICC: Continued pressure on catering brand same-store sales, price stabilization turning point can be expected.

CICC released a research report stating that there is continued pressure on same-store sales for dining brands. Since Q4, Shanghai, Guangzhou, and other places have issued dining and tourism consumption vouchers multiple times with good results. The slowdown of low-price promotions and stabilization of the market are beginning to show in certain areas, with attention focused on the strength and scope of future policies, as well as their impact on driving demand recovery. The stabilization of dining prices is expected to reach a turning point in the future, with many businesses raising prices providing some support for same-store customer spending. The adjustment in pricing is relatively manageable, with companies still maintaining flexibility through promotions and meal deals to combat competition. Leading companies continue to actively explore new models, with optimism for "industry infrastructure" with reasonable valuation. Key points by CICC are as follows: Continued pressure on same-store sales for dining brands, turning point in demand recovery still to be observed. Same-store sales pressure on dining in Q4: HAIDILAO's 2H24 same-store sales comparison base is high (2H23 overall table turnover exceeded 4 vs. 1H23 overall table turnover of 3.3), estimating that from July to August 24, table turnover was basically flat year-on-year, with single-digit declines from September to November. It is expected that December, as the month with the highest comparison base, may face pressure on table turnover year-on-year, but could see improvement from the boost of holidays. HAIDILAO's 2H24 revenue may be under pressure year-on-year, but fine management is expected to support profit growth; brands under JIUMAOJIU, such as NAIXUE, continued to face same-store sales pressure in Q4 compared to last year. Focus on policy and effects: Since Q4, Shanghai, Guangzhou, and other places have issued dining and tourism consumption vouchers multiple times with good results (such as Meituan data showing that starting from November 8th, Pudong district in Shanghai issued dining vouchers weekly, with November's dining consumption in Pudong district increasing by 19.8% compared to October, and the daily number of diners increasing by 10.8% month-on-month; according to Shanghai Municipal Commission of Commerce data, during the first two rounds of "Le Pin Shanghai" dining consumption voucher distribution, the total offline dining consumption in Shanghai was approximately 58.39 billion yuan, a year-on-year increase of 11.4%, where every 1 yuan subsidy from the voucher can bring about 4.2 yuan of consumption), focusing on the strength and scope of future policies, as well as their impact on driving demand recovery. Turning point for price stabilization, KFC China announces price increase In the second half of 2024, the dining industry has seen a trend of diminishing low-price promotions and stabilization of the market: KFC China and Luckin Coffee's same-store average price decline in 3Q24 narrowed compared to 2Q24, HAIDILAO's same-store spending also further recovered in 2H24 (by optimizing discounts and launching new high-quality dishes), estimating that the same-store spending in September 24 was nearly 100 yuan (compared to 97.4 yuan in 1H24). KFC China initiated a price increase on December 24, 2024, marking the first price increase in nearly two years (the last one was at the end of 2022 into early 2023), with specific adjustments ranging from 0.5-2 yuan, averaging a 2% increase, where popular discounted combos such as the "Foursome" special, "Crazy Day" and "OK Meal" events, and "Kids Meal" will maintain their original prices. This price adjustment provides some support for same-store customer spending, with the adjustment being relatively manageable, still maintaining flexibility through promotions and combos to compete, and observing consumer feedback and trends in order volume after the increase. Moose Ice City raised prices by 1 yuan for some products in first-tier cities in December 2024. In addition, Pizza Hut continues its strategy of expanding into the mass market by lowering prices for all 30 products in December 2024 (such as Texas-style BBQ pizza reduced by 20% to 39 yuan), with the promotion lasting from December 2, 2024, to February 28, 2025. Leading companies actively try new models According to YUM CHINA's official public account and mini-program, it is expected that Ken Yuet Coffee had over 600 stores by the end of 2024, and Pizza Hut WoW stores had surpassed 200. HAIDILAO actively explores new models and new brands after releasing the Pomegranate Red Plan: By the end of 2024, Yanqing BBQ has expanded to 20-30 stores; in August 2024, a new product called Xiaohai Love Fried Chicken was launched, and in September, a new brand called Flame Official BarBecue (first store in Wuxi, Jiangsu, focusing on barbecue, drinks, and socializing) was introduced. Valuation and Recommendations Optimistic about the "industry infrastructure" with reasonable valuation, recommending YUM CHINA (09987) and HAIDILAO (06862), with attention to DPC DASH (01405) with improving fundamentals trend. Risk Warning: Consumer spending recovery weaker than expected; deterioration in competitive landscape; same-store sales and profit margins lower than expected.