Industrial: Maintaining the "hold" rating on XIAOCAIYUAN (00999), with same-store sales under pressure in the first half of 2026.

Industrial has released a research report stating that it maintains a "hold" rating for XIAOCAIYUAN (00999). The bank expects the company to achieve operating revenues of 5.456/56.25 billion yuan in 2026/2027, a year-on-year increase of 2.1%/3.1%; net profit of 0.58/0.60 billion yuan, a year-on-year decrease of 18.8%/3.3%. The closing price on July 13, 2026 corresponds to a PE ratio of 13/12 for 2026/2027, with a dividend yield of 5.5%/5.7%. In 2026, the company is in a year of adjustment, actively adjusting menu pricing, dynamically adjusting the pace of opening stores, stabilizing the base and adjusting the internal structure. The bank expects short-term growth to slow down in exchange for stable and healthy long-term development. Industrial's main points are as follows: Pressure on same-store sales in 2026H1 The bank believes that there is a certain downward pressure on the same-store effectiveness in 2026H1, with both customer price and traffic under pressure. In terms of customer price, on the one hand, in December 2025, the company voluntarily lowered the prices of some items on the menu to increase volume, and on the other hand, the company introduced an 88VIP paid membership mechanism, where members can enjoy a year-long 12% discount on dine-in, vouchers, half-price dishes once a week on weekdays, and free rice and napkins throughout the year. The bank expects this to have a continued impact on the customer price in 2026. As of 2025A, the company's customer price was 56.1 yuan, and the bank expects it to decrease year-on-year in 2026H1 and 2026E. In terms of traffic, due to macroeconomic factors, the performance in 2026H1 was weaker than the bank's expectations at the beginning of the year, so the bank predicts that there will be pressure on same-store sales in 2026H1 and for the full year. Profit margins gradually return to normal levels The net profit margin of the company in 2025A was 13.4%, an increase of 2.2 percentage points year-on-year, reaching the highest point in the past five years and at a relatively high level in the industry. The bank believes that as the pace of new store openings slows down and same-store sales decline, the profit margin will also decline gradually, returning to normal levels. Slow store openings in 2026H1, expected to accelerate in the second half of the year As of 2025A, the total number of company's restaurants was 807. The speed of new store openings in the second half of 2025 increased compared to the first half, and the bank expects the same trend for the second half of 2026. As of 2026H1, the company had 828 stores (source: Narrow Doors and Eyes), with a net increase of 21 stores compared to the end of 2025. The bank predicts that the total number of company's stores by the end of 2026E will be 907. Leading industry dividend payout ratio At the end of 2025, the company announced a dividend of 0.2125 yuan per share, with an annual dividend of 0.4244 yuan per share, totaling 5.0 billion yuan, accounting for 70% of the net profit attributable to the parent. Assuming an expected dividend payout ratio of 70% for 2026E, the dividend yield for 2026E on July 13 is 5.5%. Risk factors 1. Food safety; 2. Significant cost increases; 3. Intensified competition; 4. Same-store performance falling short of expectations.