Soochow Securities has raised its profit forecast for GUOQUAN (02517) following better-than-expected Q3 2025 performance. The revised estimates project net profits attributable to shareholders of RMB 440 million, RMB 560 million, and RMB 680 million for 2025-2027 (up from previous estimates of RMB 420 million, RMB 500 million, and RMB 580 million), representing year-on-year growth of 93%, 27%, and 21%, respectively. This translates to a PE ratio of 21x, 17x, and 14x for the respective years. The firm maintains its "Buy" rating.

Key highlights from GUOQUAN's Q3 2025 business update: - Net store additions reached 361 in Q3, bringing the total store count to 10,761 by end-September 2025. - Q3 revenue ranged between RMB 1.85 billion to RMB 2.05 billion, up 13.6%-25.8% year-on-year. - Core operating profit stood at RMB 65-75 million, surging 44.4%-66.7% year-on-year.

With Q4 typically being the peak season for store expansion, Soochow expects GUOQUAN to exceed its annual target of 1,000 net new stores ahead of schedule. The mid-point calculation shows Q3 core operating net profit margin at 3.6%, marking a 0.8 percentage point improvement year-on-year. This margin expansion trend has been consistent throughout the year.

The report highlights GUOQUAN's improving same-store sales, enhanced franchisee motivation, and successful rural store model as competitive advantages. Supply chain optimization and economies of scale continue to drive net margin growth. With 2026 valuation below 20x PE and sustained earnings outperformance, the stock offers a safety margin.

Risks include food safety issues, intensifying industry competition, and weaker-than-expected consumer spending recovery.