Cinda Securities released a research report initiating coverage on XIAOCAIYUAN (00999), a leading mass-market Chinese casual dining chain, with a "Buy" rating and a target price of HK$13.02. The report highlights the company's commitment to delivering affordable yet high-quality dining experiences, aligning with consumers' growing preference for value-for-money offerings.
Despite a decline in same-store sales (primarily due to lower per-customer spending), XIAOCAIYUAN is expected to achieve steady revenue growth through rapid store expansion. Its robust supply chain system and optimized single-store model are projected to enhance operational efficiency.
Cinda Securities forecasts EPS for 2025–2027 at RMB 0.65, 0.79, and 0.94 per share, respectively. Key insights include:
**Company Overview** XIAOCAIYUAN is a leader in China's mass-market casual dining segment, operating under its flagship brand alongside five others, including "Caishou," "Guandi," and "Fuxinglou." As of June 2025, it had 672 "XIAOCAIYUAN" outlets. According to Frost & Sullivan, the brand ranked first in the RMB 50–100 per-customer segment in 2023, holding a 0.2% market share.
**Rapid Expansion and Strong Single-Store Performance** Since 2023, the company has accelerated store openings, adding over 100 locations annually. By November 2025, it had 816 directly operated stores (including pending openings), with plans to reach ~1,000 by end-2026. New stores demonstrate strong cash flow performance, achieving breakeven within 1–2 months and an average payback period of ~13.8 months as of August 2024.
Store-level profitability remains robust, with operating profit margins (OPM) at 15.9%, 14.2%, 19.7%, and 17.8% for 2021, 2022, 2023, and the first eight months of 2024, respectively. Cinda Securities estimates OPM could exceed 20%.
**Integrated Supply Chain** The company operates a centralized procurement system, central kitchens, and a cold-chain logistics network to enhance efficiency. Its Anhui-based central kitchen reduces labor-intensive processes, enabling faster meal preparation with pre-processed ingredients. A new facility is under construction in Ma'anshan.
Centralized procurement and competitive pricing have lowered the cost of raw materials and consumables from 34.5% of revenue in 2021 to 29.5% in H1 2025.
**Standardized Operations** XIAOCAIYUAN has implemented standardized practices across menu offerings, service, supply chain, training, food safety, and store expansion, supporting rapid growth and cost efficiency.
**Risks** Potential risks include macroeconomic impacts on the dining sector, food safety issues, slower-than-expected store expansion, and significant same-store sales declines.
Comments