Guosen Securities has reiterated its "Outperform" rating on GUOQUAN (02517), projecting the company's total operating revenue to reach RMB7.33/8.44/9.59 billion in 2025-2027, representing year-on-year growth of 13.3%/15.1%/13.6%. Net profit attributable to shareholders is expected to be RMB410/490/560 million during the same period, with year-on-year increases of 78.9%/19.4%/13.7%. EPS is forecast at RMB0.15/0.18/0.20, with a target price range of HK$4.03-4.51.
As a franchise leader in the growth sector, GUOQUAN has initially established a 10,000-store network. The company's profitability could improve further as it enhances supply chain efficiency. GUOQUAN adopts a "single product, single factory" model, operating seven self-built factories covering seasonings, meatballs, seafood, and other categories, with production capacity reaching 25,000 tons in 2022. In 2024, the acquisition of Huading Cold Chain strengthened its nationwide cold chain network, covering 290 cities.
The company has refined its operations by increasing multi-store franchisees, with stores widely distributed in lower-tier cities. It rapidly iterates products based on consumer feedback and continuously optimizes its store model. Guosen estimates payback periods for stores in provincial capitals, prefecture-level, and county-level cities at 12.2/17.9/20.1 months, respectively.
Additionally, GUOQUAN is actively expanding into new channels like Douyin, achieving over 100% growth in online popular meal packages in 2024. Under a neutral scenario, the company's total store count could reach 19,000, with growth mainly driven by lower-tier markets.
To improve single-store efficiency, GUOQUAN has boosted revenue recovery through popular offerings like the "Free Tripe Combo" and extended operating hours via unmanned retail models in 2,000 stores. Compared to Japan's Kobe Bussan (ROE ~21%), GUOQUAN has reduced capital expenditure from RMB250 million in 2022 to RMB150 million in 2024. Scale effects may further lower costs, creating room for net margin improvement.