Date of Report

October 22, 2024

Broker

UOB Kay Hian

Company Overview

Jiumaojiu International Holdings is a leader in China’s north-western cuisine and specializes in Chinese sauerkraut fish. The company operates several catering brands, including Jiu Mao Jiu, Tai Er, Song Hotpot, Lai Mei Li, and Uncle Chef.

Stock Data

• GICS Sector: Consumer Discretionary
• Bloomberg Ticker: 9922 HK
• Shares Issued: 1,410.6 million
• Market Capitalization: HK$4,542.0 million (US$584.4 million)
• 3-Month Average Daily Turnover: US$18.6 million
• 52-Week High/Low: HK$9.16 / HK$2.14

Recent Performance

• Share Price: HK$3.22
• Target Price: HK$5.20 (Previous Target Price: HK$3.80)
• Upside Potential: 61.5%

Operational Updates for 3Q24

• Sequential Improvement: The company reported improvements in table turnover rates and same-store sales (SSS) during 3Q24, particularly during the Golden Week.
• Average Spending Per Customer (ASP):
  • Tai Er: Rmb69
  • Song Hot Pot: Rmb97
  • Jiu Mao Jiu: Rmb54
• Table Turnover Rates:
  • Tai Er: 3.6x
  • Song Hot Pot: 3.0x
  • Jiu Mao Jiu: 2.8x

Revenue Insights

• Business Operations: Improvement was observed in 3Q24 compared to 2Q24, with management expecting operating margins to enhance in the second half of the year, driven by lower labor costs and amortization expenses.
• Same-Store Sales Growth (YoY %):
  • Tai Er: -18%
  • Song Hot Pot: -33%
  • Jiu Mao Jiu: -10%

Store Expansion Plans

• Cautious Store Opening Target:
  • Management has reduced Tai Er’s 2024 store opening target to 70 new stores from the previous 80.
  • For Song Hot Pot, the target remains at 25 new stores.
• Store Openings in 9M24:
  • 62 Tai Er stores and 17 Song Hot Pot stores have been opened, achieving approximately 89% and 68% of their respective annual targets.

Financial Projections

• Net Turnover (Rmbm):
  • 2023: 5,986
  • 2024F: 6,380
  • 2025F: 7,861
  • 2026F: 9,215

Analyst Recommendations

• Recommendation: Maintain a BUY rating on Jiumaojiu International Holdings.
• Valuation: The target price implies a price-to-earnings (PE) ratio of 21.4x for 2024F and 14.7x for 2025F, compared to the current trading PE of 13.6x for 2024F and 9.4x for 2025F.