The Zhitong Finance App learned that Zhishang Securities released a research report saying that at present, China's domestic fast food/hot pot/tea track boom is still high, and corresponding track leaders such as Dashi (01405), Yum China (09987), Haidilao (06862), Michelle Ice City, and Gu Ming all deserve continued attention. Currently, the chain rate of fast food/hot pot/tea in China is about 6%/16%/50% respectively, and there is a lot of room for improvement compared to the overall catering in the US. Chinese food has a sea-view atmosphere and has great potential. As a leading overseas Chinese food brand, Tehai International (09658) has opened 115 stores in more than 10 overseas countries. Net profit has been positive for 3 consecutive months, demonstrating strong overseas profitability. Combined with expectations of speeding up store opening, the prospects are broad.

The views of Zheshang Securities are as follows:

The total scale of domestic social zero restaurants is 4-5 trillion yuan, and segments such as fast food/hot pot/tea are still very popular; the scale of international Chinese food is close to 2 trillion yuan, and the potential for Chinese food is high in terms of sea view and huge potential

From an overall scale perspective, in 2010-2019, China's Social Zero Catering grew steadily to 4-5 trillion yuan at an annualized compound growth rate of 10+%. Affected by the “black swan” incident in 2020-2022, the absolute value is still at 4-5 trillion yuan, accounting for about 11% of the total social zero share. From the perspective of number of stores, the number of restaurants is related to the number of resident populations. Regions with a larger resident population tend to have more restaurants. From a category perspective, the overall catering market has entered a competitive environment, and segments such as fast food/hot pot/tea are resilient and still have high potential, and are still booming, and deserve continued attention. The number of new stores opened is an important tracking indicator of the popularity of the segmented racetrack. In 2023, the number of new fast food/noodles/hot pot/tea stores opened exceeded 100,000, and the number of fried chicken burger/braised cooked food/bread baking/rice noodles and rice noodles opened more than 50,000 new stores. It is a highly prosperous segmented track. From the perspective of going overseas, the international Chinese food market will exceed 260 billion US dollars in 2021, CR5 is less than 3%, and the potential is huge.

The linkage rate is strongly related to the economic level. Improving the supply chain can lead categories to achieve leapfrog development

Compared to objective conditions such as taste/region, the level of economic development is a more important factor limiting the increase in the chain rate of restaurants. There is a strong correlation between the food chain rate and per capita GDP. The higher the per capita GDP, the higher the restaurant chain rate. From an international perspective, the US, Japan, UK, and France restaurant chain rate in 2020 (in terms of revenue) was 60+%/50+%/40+%, respectively, far exceeding China's 17%, which is directly related to GDP per capita. From the perspective of each province and city, the findings are consistent with international data. As a result, the level of GDP growth in each region is an important tracking indicator for the overall prosperity of the catering industry.

The supply chain system is the core reason for the differences in the linkage rate between categories. The process of increasing the chain chain rate is often accompanied by high-quality investment opportunities for catering supply chain companies. The tea and beverage category has experienced nearly 10 years of development. The tea bottom/syrup/small ingredients supply chain has achieved independent local standardized production and distribution, thus driving its chain rate of over 25% in all provinces and cities; pizza and fried chicken burgers have also already completed standardization of all aspects of production, processing and store processing, under the impetus of leading companies such as Yum Sheng China, which has driven its chain rate of more than 15%. In fact, in the process of rapidly increasing the category chain rate, brands often focus on horse racing and brand marketing. Heavy and complicated supply chain links are usually outsourced. At this time, supply chain companies can enjoy industry dividends, often accompanied by high-quality investment opportunities with higher certainty. The category chain rate is an important tracking indicator for the prosperity of enterprises in the catering supply chain.

Compared to objective conditions such as linkage rate/taste, price positioning is an important factor affecting channel decline. Opening a store is still the most important source of growth for some catering companies. The turnover rate and daily sales of a single store are forward-looking indicators of opening a store. As the turnover rate continues to improve, restaurant brands will have the endowment and motivation to expand their stores. Most catering companies in China use a top-down approach to channel layout. Currently, most of them have entered the sinking stage. Currently, categories with a relatively high number of stores in low-tier cities in China often have the characteristic of having a lower main price band. As a result, the core of the channel decline is the decline in the price band. It is necessary to continuously optimize the store model, upgrade its own supply chain capabilities, and ultimately internalize it into the store-level operating profit margin of the enterprise. The customer unit price in segmented cities and the operating profit margin at the store level are important forward-looking indicators and tracking indicators for the success of the channel decline.

Related targets: Fast food/hot pot/tea are still booming, and the brand and supply chain are expected to win

Currently, the popularity of fast food/hot pot/tea tracks in China is still high. Corresponding track leaders such as Dashi Co., Ltd., Yum Sheng China, Haidilao, Snow Ice City, and Gu Ming all deserve continued attention. Currently, the chain rate of fast food/hot pot/tea in China is about 6%/16%/50% respectively, and there is a lot of room for improvement compared to the overall catering in the US. Chinese food has a sea-view atmosphere and has great potential. As a leading overseas Chinese food brand, Tehai International has opened 115 stores in more than 10 overseas countries. Net profit has been positive for 3 consecutive months, demonstrating strong overseas profitability. Combined with expectations of speeding up store opening, the prospects are broad.

Risk warning: risk of macroeconomic stagnation, risk of increased industry competition, risk of statistical bias, etc.