Soochow Securities released a research report stating that catering brands have become more rational, with the industry structure optimizing and the Matthew effect becoming pronounced, making leading players more resilient. Marginal recovery in the catering sector has been verified, with high sustainability expected. As a pro-cyclical sector and a vanguard of consumption recovery, key catering enterprises continue their improving trend. The report recommends targets related to hot pot, leading Western and Chinese fast-food chains, and casual dining. The main views of Soochow Securities are as follows:
Catering data shows improvement, with expectations for enhanced continuity. (1) At the industry level, relevant risk factors have been released. If subsequent policies stimulating service consumption and catering are implemented, chain catering brands will directly benefit. (2) At the company level, the store closure/adjustment cycles for leading brands are nearly complete (e.g., brands like Jiumaojiu, Haidilao, Yum China), indicating potential for upward momentum.
As a vanguard of consumption recovery, key enterprises continue their improving trend. Reviewing the performance of China's catering industry since 2020, influencing factors include base effects, pandemic recurrences, seasonality, and consumer spending power. It is noteworthy that since October 2025, the year-on-year growth rate of catering revenue in total retail sales has been significantly higher than the overall retail sales growth, with a clear sequential acceleration. Attention should be paid to the elasticity of catering (especially large-chain catering) driven by subsequent service consumption stimulus policies.
The food delivery competition in 2025 increased penetration rates, but brands have become more rational, the industry structure has optimized, the Matthew effect is evident, and leading players show greater resilience.
Improved structure, brand differentiation. According to the China Chain Store & Franchise Association's "CCFA Data Read: 2025 Chain Catering Survey Flash Report," flat comparable average store sales in 2025 were a common phenomenon. Most surveyed chain catering enterprises saw their 2025 net profit year-on-year remain flat or slightly decline (down less than 20%). Regarding store openings and closures, new enterprise registrations have declined since 2023, and the peak closure rate (2024) has passed, indicating a stabilizing industry structure. Taking 2025 as an example, net store additions were significantly concentrated among leaders. Catering enterprises with over 10,001 stores saw notably leading net additions, reaching 6,534 stores in a single year. Brands with 1,000 stores or fewer adopted cautious new opening strategies, with some types even experiencing slight contraction.
Leading brands are differentiating but are on track. Commonality 1: Low valuations. As of February 26, 2026, Western fast-food brands like Yum China and DPC Dash had P/E ratios of 21x and 70x, at historical percentiles of 41% and 1% respectively. Casual dining brands like Green Tea Group and Jiumaojiu had P/E ratios of 11x and 61x, at historical percentiles of 58% and 45%. Hot pot and full-service restaurant brands like Haidilao and Guangzhou Restaurant Group had P/E ratios of 20x and 20x, at historical percentiles of 30% and 21%. Reviewing US stock performance, since 2010, leading fast-food chains have maintained stable P/E ratios typically between 20-40x. From 2006 to present, Yum Brands and McDonald's market capitalizations have increased approximately 5-fold and 3-fold respectively, with their sustained and steady performance effectively digesting valuations.
Commonality 2: Store counts for leading catering enterprises are gradually returning to an upward trajectory. This includes expansion logic for evergreen leaders steadily opening new stores (e.g., Yum China), and newer brands in their first expansion honeymoon phase (e.g., DPC Dash, Green Tea Group, Meet Noodle). It also includes enterprises that expanded too rapidly previously; their current closure cycle is nearly over, with store counts stabilizing, paving the way for a new round of rational expansion.
Commonality 3: Improving operational data. Same-store sales (or transaction counts) for most chain catering outlets are gradually improving; average customer spending also shows signs of stabilization.
Commonality 4: Actively seeking a second growth curve. New brands/new store formats show promise. Examples include Haidilao launching new concepts like Yanqing Barbecue, Jugao Gao (single-person rotating hot pot), and Sushi; new store formats are exemplified by Yum China, Jiumaojiu, and Green Tea Group.
Commonality 5: Structural cost optimization, primarily in rental costs.
Commonality 6: AI digitalization and supply chain efficiency improvements.
In the new catering cycle, evergreen leaders and emerging brands also show differentiation. (1) Evergreen leaders: Early market entrants with scarce positioning. Strategies include slowing store openings or closures (Haidilao, Jiumaojiu); store model adjustments (Jiumaojiu/Green Tea Group - new models, Yum China - new formats); and pushing new brands (Haidilao). (2) Emerging brands: Less focus on specific segments, breaking through relies on their own differentiated capabilities (Meet Noodle - backend systems, DPC Dash - delivery model). They are in an expansion honeymoon phase, with strategies including regional expansion (Green Tea Group, DPC Dash, Xiao Cai Yuan) and下沉market expansion (Meet Noodle).
Risk warnings: Intensified competition in the catering market, rising raw material costs, risks associated with brand aging and customer loss.
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