Jiumaojiu Earnings: Management Maintains 2024 Unit Outlook, Expects Margin Expansion

There were few surprises in Jiumaojiu’s 2023 results because the company had already issued a profit alert with revenue and bottom-line numbers in January. We slightly lower our near-term forecasts to factor in more-aggressive promotions and thinner crowds. We would still treat volatility in the stock as opportunistic entry points, although we acknowledge that further macroeconomic weakness could lead to downward revisions in forecasts. That said, our base case assumes that the operating environment for restaurants in 2024 will be slightly better than that in late 2023, and Jiumaojiu should record positive same-store sales growth for the full year, translating to a slight improvement in margins. We maintain our HKD 13.70 fair value estimate. With the shares trading at about 13 times estimated 2024 earnings, we consider no-moat Jiumaojiu to be very undervalued.