Huaxing Securities has reiterated its "Hold" rating and earnings forecast for JIUMAOJIU (09922) while lowering the target price by 29% to HK$1.77, implying a 12x 2026 P/E ratio. The company's Q3 operations remained stable, though its core brands are undergoing adjustments, with same-store sales declines for Tai Er, Song Hotpot, and JIUMAOJIU. Notably, Tai Er's decline showed a narrowing trend within the quarter. Due to ongoing store optimizations, full-year profits may slightly underperform current expectations.
Key insights from Huaxing Securities: 1. **Q3 2025 Operational Overview**: - As of Q3 2025, JIUMAOJIU operates 530 Tai Er restaurants (509 self-operated), 71 Song Hotpot outlets, 64 JIUMAOJIU restaurants (63 self-operated), and 21 other branded stores. - Turnover rates: Tai Er self-operated stores in mainland China averaged 3.2 times/day (other regions: 3.9), Song Hotpot at 2.4, and JIUMAOJIU self-operated stores at 2.5. - Average spending per customer: Tai Er (mainland China: RMB66; other regions: RMB155), Song Hotpot (RMB100), and JIUMAOJIU (RMB58). - Same-store daily sales: Tai Er (-9.3% YoY), Song Hotpot (-19.1%), JIUMAOJIU (-14.8%).
2. **Q4 Brand Adjustments Progressing Smoothly**: - Tai Er’s same-store sales decline narrowed further in Q3 compared to H1 2025, approaching flat growth by early September. However, traffic was impacted in September by a pre-made meal incident involving a competitor, though recovery began post-National Day holiday. The bank expects Tai Er’s same-store sales could turn positive by year-end. - Tai Er is refining its store model, introducing live-fish preparation (minimal impact on standardization), updating menus (no additional chefs required), and slightly raising costs due to higher ingredient wastage. Each store may add 3–4 staff, but higher average spending will offset labor cost increases. The company plans to revamp 200+ Tai Er stores this year, with the remaining 300+ to follow in 2026. - JIUMAOJIU and Song Hotpot show similar trends. Song’s performance remains volatile, but new store models aim to stabilize same-store sales.
3. **Industry Context**: The dining sector is transitioning as consumers demand upgrades across ambiance, space, product quality, pricing, service, and promotions. JIUMAOJIU’s proactive adjustments may pressure short-term financials but position it for sustained growth.
**Risks**: - Upside: Faster-than-expected expansion/performance at Tai Er or Song. - Downside: Macroeconomic slowdown, rising ingredient costs, or food safety issues.
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