Overview of Jiumaojiu International Holdings

Jiumaojiu International Holdings, a prominent operator in the Chinese catering market, specializes in managing multiple restaurant brands. These include “Jiumaojiu Northwest Cuisine,” “Tai Er Chinese Sauerkraut Fish,” “Song Hotpot Factory,” and the newly introduced “Shandeshanwaimian” brand. In the first half of 2024, the company disposed of the “Uncle Chef” brand to streamline its portfolio.

The company’s operations span both domestic and international markets, with a strategic focus on expanding their restaurant footprint while optimizing underperforming outlets. Despite challenges in 2024, Jiumaojiu remains a notable contender in the consumer discretionary sector.

Key Stock Data

• Share Price: HK\$2.74
• Target Price: HK\$4.00 (Reduced from HK\$5.20)
• Upside Potential: +46.0%
• Market Cap: HK\$3,829.5 million (US\$492.0 million)
• 52-week High/Low: HK\$6.12 / HK\$2.14
• Major Shareholder: Mr. Guan Yihong (38.88%)
• Ticker: 9922 HK

Operational Challenges in 4Q24

The business faced significant hurdles during the fourth quarter of 2024. Table turnover rates fell quarter-on-quarter (qoq) across its key brands:

• Tai Er: Declined to 3.0x from 3.6x in 3Q24
• Song Hot Pot: Dropped to 2.7x from 3.0x
• Jiu Mao Jiu: Reduced to 2.4x from 2.8x

Same-store sales also experienced year-on-year (yoy) declines:

• Tai Er: -24.6% (compared to -18.3% in 3Q24)
• Song Hot Pot: -26.9% (improved from -32.5% in 3Q24)
• Jiu Mao Jiu: -18.5% (versus -10.3% in 3Q24)

Despite these setbacks, the average spending per customer (ASP) improved due to reduced promotions:

• Tai Er: Increased to RMB72 from RMB69 in 3Q24
• Song Hot Pot: Rose to RMB99 from RMB97
• Jiu Mao Jiu: Remained stable at RMB54

Store Openings and Closures

In 2024, Jiumaojiu opened 71 self-operated Tai Er stores (including 13 overseas), and 28 Song Hot Pot stores. However, underperforming stores were simultaneously closed, resulting in net additions of 45 Tai Er stores and 18 Song Hot Pot outlets. For 2025, the management plans to adopt a cautious approach toward new store openings, dynamically adjusting their strategy based on market conditions.

Financial Performance

Key Financial Metrics

Jiumaojiu’s net profit is forecasted to decline by 40.8% in 2024, reflecting the operational challenges and impairment losses from store closures. However, recovery is expected in 2025, with a projected net profit growth of 37.3%.

Impairment Losses and Margin Risks

In 2024, Jiumaojiu incurred RMB39 million in impairment losses in the first half of the year. Additional losses of RMB20-30 million for Tai Er and RMB15-20 million for Song Hot Pot are anticipated, as underperforming stores continue to close in 2025. Management expects limited room for labor cost optimizations in 2025, further pressuring operating margins.

Shareholder Returns

The company is committed to enhancing shareholder value. It delivered a dividend payout ratio of 43% in 2023 and may increase this in 2024. Furthermore, Jiumaojiu has announced a RMB200 million share repurchase plan, with RMB80 million remaining to be executed.

Valuation and Recommendations

UOB Kay Hian maintains a “BUY” recommendation for Jiumaojiu, albeit with a reduced target price of HK\$4.00 (down 23%). This represents a 14.1x 2025F PE, with the stock currently trading at 10.1x 2025F PE. Despite short-term challenges, the long-term outlook remains promising for this Chinese catering giant.