Goldman Sachs: Jiu Mao Jiu Tai Er Growth Slows, Bullish on 2027 Earnings Improvement

Overview

This report is based on meeting minutes from Goldman Sachs' Asia-Pacific Consumer and Leisure Enterprises Day event, outlining the latest operational views of Jiu Mao Jiu (9922.HK) management. The core conclusion is: although Tai Er Sour Fish recent same-store sales growth slowed temporarily due to weather and holiday factors, and Feng Hot Pot business still faces challenges, the company has improved single-store productivity through store model upgrades (such as Tai Er 6.0 format) and organizational restructuring. Management expects that as store upgrades are completed and loss-making businesses stabilize, group net profit margin will improve in 2027. Goldman Sachs maintains a Buy rating on Jiu Mao Jiu, with a target price of HKD3.10.

Core views

Recent operating performance differentiated: Tai Er Sour Fish same-store sales growth (SSSG) in China slowed from double-digit growth in April-May to mid-single-digit growth in June (+MSD%). This slowdown was mainly attributed to holiday time misalignment and rainstorm weather affecting foot traffic in late June. Notably, new model stores achieved high single-digit growth in June, while old stores remained flat. The same-store sales decline for the Jiu Mao Jiu brand narrowed from mid-double-digits in April-May to high single-digits in June (-HSD%), mainly benefiting from the contribution of new store formats; 5 new stores achieved double-digit same-store growth in June, with weekday table turnover exceeding 4 times and holidays exceeding 5 times. In contrast, Feng Hot Pot same-store sales have continued to deteriorate since Q1 2026. Store Strategy and Network Optimization: Tai Er will focus on store renovations this year, progress in line with expectations, and plans to resume net opening of key tier cities in 2027 to increase density, provided the 6.0 format continues to succeed. Tests showed first-week sales of 6.0 format stores were about 30%-40% higher than old formats. Jiu Mao Jiu brand has upgraded about 10 stores and will continue to replace old stores with new model stores in better locations. Feng Hot Pot closed about 10 stores in H1 2026 and will continue closing stores in H2. Profitability and Shareholder Returns: At store level, Tai Er demonstrated profitability improvement through better raw material utilization, labor optimization, and rent renegotiation. However, at group level, short-term profits remain dragged down by Feng Hot Pot store closures and impairment losses, as well as upfront costs of new restaurants. Management believes that as the Feng brand stabilizes and Tai Er and Jiu Mao Jiu store upgrades complete, net profit margin (NPM) will improve in 2027. Additionally, the company commits to continuing share buybacks subject to regulatory approval and maintaining a dividend payout ratio no less than 40%.

Analysis framework

The institution adopted a typical top-down and bottom-up combined analysis approach. First, assess short-term market sentiment of each brand by tracking high-frequency same-store sales data (SSSG), distinguishing between one-off factors like weather and structural trends. Second, deeply analyze the company's supply-side reform measures, especially the pull effect of 'store model iteration' (such as 6.0 format) on single-store sales and table turnover rates, to judge endogenous growth momentum. Finally, combine company CAPEX plans (renovation vs. new openings) and wind-down pace of loss-making businesses (Feng Hot Pot) to derive the P&L repair timing, shifting from short-term investment period to 2027 harvest period.

Methodology notes

• Industry/Industrial Analysis FrameworkVolume-Price Splitting

  Same-Store Sales Growth (SSSG) Analysis

  By decomposing sales revenue into 'foot traffic' and 'average ticket price' or 'same-store' and 'new-store' contributions, helping investors identify whether growth stems from efficiency improvements in existing stores or scale expansion. This research report focuses on comparing SSSG differences between old and new model Tai Er stores to verify the effectiveness of the new format.

• Company Fundamentals and Financial Framework

  Single-Store Economic Model Iteration

  Focus on the process of catering enterprises improving single-store sales and profit margins by updating store image, menu, or service processes (such as Tai Er 6.0 format). This is a critical micro-indicator for assessing catering brand vitality and anti-competitive ability.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Jiu Mao Jiu (9922.HK)

  Direct beneficiary, improving long-term profitability through store upgrades and multi-brand operations

  Strengths

  Deep moat in Tai Er brand, excellent new store sales performance; stable cash flow, committed to high dividends and buybacks

  Weaknesses

  Feng Hot Pot business continues to lose money and drags down group overall profit; overseas business (Southeast Asia) still declining

  Comparison

  More focused on single-store quality rather than blind expansion compared to peers, stronger risk resistance

  Risks

  New format promotion below expectations; food safety risks; intensified market competition

Key data

• Tai Er June China SSSG+ Mid Single-Digit %Slowed from double-digit growth in April-May, affected by rainstorms
• Tai Er 6.0 New Store First Week Sales Increase+ 30%-40%Compared to old store format
• Jiu Mao Jiu June SSSG- High Single-Digit %Decline narrowed from mid-double-digits in April-May
• Target Price3.10 HKDBased on 7x 2026 expected EV/EBITDA
• Dividend Payout Ratio Commitment≥40%Management commits to maintaining minimum ratio

Impact & implications

The report believes that although short-term data is disturbed by weather, Jiu Mao Jiu is consolidating long-term competitiveness through active store model upgrades and product innovation. The successful test of Tai Er 6.0 format provides confidence for future large-scale replication, and the stabilization of the Jiu Mao Jiu brand shows the resilience of the multi-brand strategy. For investors, 2026 may be a painful period of investment and transformation, but 2027 is expected to see significant recovery in earnings quality. Current stock price implied valuation is low, reflecting market concerns over Feng Hot Pot drag; if new format promotion proceeds smoothly, there is room for valuation repair.

Risks

• Demand weaker than expected, same-store sales recovery weak
• New store model cannot achieve sustainable performance
• Intensified industry competition and pricing risks
• Profit margin volatility risks
• Risk of being removed from Stock Connect
• Food safety issues

What to watch

• Effectiveness and sales sustainability of Tai Er 6.0 format promotion on a larger scale
• Closure progress of Feng Hot Pot and when breakeven will be achieved
• Specific realization of 2027 net margin improvement
• Signs of stabilization in overseas business (especially Southeast Asia)