Caitong Securities has initiated coverage on XIAOCAIYUAN (00999), a leading player in the new Huizhou cuisine segment, with a "Buy" rating. The firm highlights the company's strategic positioning in the mass convenience market and its rapid expansion driven by a "strong supply chain + direct operation model." Key points from the report include:
Founded in 2013, XIAOCAIYUAN focuses on affordable home-style Huizhou cuisine. Starting in Anhui province, the company established its own central kitchen and supply chain system before steadily expanding nationwide. Its direct-operation model has fueled rapid store growth, with 667 operational stores by the end of 2024, marking a 23% year-on-year increase. In 1H2025, the company reported revenue of RMB 2.71 billion (+6.5% YoY) and net profit attributable to shareholders of RMB 380 million (+35.7% YoY), demonstrating strong performance.
The mass convenience dining market, driven by affordability, remains highly fragmented but resilient. According to Frost & Sullivan, this segment grew at a 3.8% CAGR from 2018–2023, outpacing the 2.5% CAGR of mid-to-high-end dining. In 2023, the market size reached RMB 36.19 billion, with the RMB 50–100 price range dominating. Frost & Sullivan projects an 8.9% CAGR for the next five years. XIAOCAIYUAN is well-positioned to capture market share through chain expansion and digitalization.
**Key Strengths:** 1. **Self-built supply chain:** The company ensures high-quality, low-cost, and stable ingredient supply through its central kitchen and cold-chain logistics system. 2. **Standardized processes:** Precise cooking guidelines and proprietary seasoning packs guarantee consistent taste, while SOPs and multi-dimensional training enhance operational efficiency. 3. **Talent retention:** A three-tier organizational structure, partnership system, and mentorship program foster talent development, with over 90% of core staff promoted internally. Employee stock ownership platforms further incentivize high-performing store managers.
XIAOCAIYUAN’s store payback period averaged 13.8 months in 2024, significantly better than industry standards.
**Investment Outlook:** Caitong Securities forecasts 2025–2027 revenue of RMB 6.08/7.60/9.31 billion and net profit of RMB 753/961/1,198 million, with corresponding P/E ratios of 15x/12x/9x.
**Risks:** Intense competition, rising raw material costs, slower store expansion, food safety issues, share unlock risks, and brand risks associated with the direct-operation model.
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