JIUMAOJIU's three core restaurant brands are all under comprehensive pressure.

On September 8, the Shenzhen Stock Exchange announced adjustments to the Stock Connect eligible securities list, effective immediately. According to the latest list, a total of 20 securities including JIUMAOJIU (09922.HK) were removed from the program.

Generally speaking, the Shenzhen Stock Exchange's adjustments to Stock Connect eligible securities reflect market judgment on corporate prospects and demonstrate industry trend changes and shifts in investor preferences.

In the first half of this year, JIUMAOJIU, which is in an adjustment and transformation phase, delivered a report card showing declines in both revenue and net profit. During the period, the company achieved revenue of 2.753 billion yuan, down 10.14% year-on-year; net profit attributable to shareholders was 60.69 million yuan, down 16.05% year-on-year, continuing the downward trend from the 2024 interim period.

**88 Restaurants Closed in Six Months**

As a restaurant enterprise, JIUMAOJIU's three core brands - Tai Er, Song Hot Pot, and JIUMAOJIU (Northwest Cuisine) - all showed pressure. Among them, Tai Er Restaurant, which carries the performance banner, achieved revenue of 1.949 billion yuan, down 13.3% year-on-year, accounting for 70.8% of total revenue, compared to 73.4% in the same period last year. This marks Tai Er's first interim performance decline.

Song Hot Pot came second with revenue of 417 million yuan, down 3.5% year-on-year, accounting for 15.1% of revenue; JIUMAOJIU (Northwest Cuisine) generated revenue of 226 million yuan, down 22.6% year-on-year, accounting for 8.2% of revenue, becoming the most severely declining segment among the three major brands.

Behind the weakening performance of the three major brands lies the dual impact of store scale contraction and declining operational efficiency.

In terms of stores, JIUMAOJIU opened 10 new restaurants in the first half, including 3 Tai Er restaurants (one of which was a franchise store), 5 Song Hot Pot restaurants, and 2 Shanwaimian cooperative model restaurants. Additionally, 10 self-operated Tai Er restaurants were converted to franchises. In comparison, it opened 59 new restaurants in the first half of last year, showing a significant slowdown in expansion pace.

This contrasts sharply with large-scale store closures.

In the first half of this year, JIUMAOJIU closed 88 restaurants, compared to 14 in the same period last year. Regarding this year's closures, the company explained they were mainly due to lease agreements terminating upon expiration and some restaurants' performance falling short of expectations.

As of the end of June, JIUMAOJIU operated 729 restaurants, a net decrease of 78 from the initial 807 at the beginning of the period. Calculated based on 88 closures, the closure rate exceeded 10%.

Tai Er was the "hardest hit area" for closures. As of the end of June, it operated 566 restaurants, a net decrease of 68 from the beginning of the period. Additionally, Song Hot Pot and JIUMAOJIU had 76 and 68 stores respectively at period-end, net decreases of 4 and 3 stores from the beginning of the period.

**Tai Er Brand Falls from Grace**

Declining restaurant operational efficiency is another important factor in JIUMAOJIU's performance pressure.

In the first half, the severe external environment led to reduced customer traffic, making it increasingly difficult for JIUMAOJIU's restaurants to "retain customers," with table turnover rates declining across all three major brands.

Tai Er's (self-operated) table turnover rate dropped from 3.8 times per day in the same period last year to 3.1 times per day in the first half of this year, while in the 2023 interim period, this indicator stood at 4.3 times per day; Song Hot Pot declined from 2.9 times per day to 2.5 times per day; JIUMAOJIU (self-operated) dropped from 2.8 times per day to 2.5 times per day. Table turnover rate directly reflects the prosperity of restaurant business.

Once upon a time, Tai Er, having just entered the market, became the "ceiling" in the pickled fish sector due to its unique positioning and taste, and was once dubbed the "queuing king." Now with declining customer traffic and reduced table turnover rates, same-store sales have also seen significant declines. In the first half, Tai Er's (self-operated) same-store sales were 1.536 billion yuan, down 19% year-on-year.

Other brands' same-store performance was equally poor. Song Hot Pot's same-store sales dropped from 360 million yuan in the first half of last year to 288 million yuan, a decline of 20.1%; JIUMAOJIU (self-operated) fell from 240 million yuan to 193 million yuan, down 19.8%. The three major brands can be described as suffering across-the-board defeats.

**Seeking Market Recovery with "Fresh Live" Strategy**

To improve performance, JIUMAOJIU has focused efforts on the Tai Er brand.

In the first half, Tai Er launched the "5.0 Fresh Live Mode," introducing an upgraded menu centered on three signature items: "live fish, fresh chicken, and fresh beef." Simultaneously, some stores underwent renovation, with wok stations and chefs added to back kitchens for on-site cooking, emphasizing the freshness of dishes.

This is actually a responsive adjustment to previous market skepticism about pre-prepared dishes.

Previously, Tai Er Restaurant faced consumer skepticism about pre-prepared food because fish were not freshly killed, consumers were unclear whether they were long-term frozen products, and pickled vegetable seasoning packets were pre-prepared, making spice level adjustments impossible. The controversy was further intensified when Tai Er's quick-cook dishes available on certain platforms tasted similar to in-store offerings.

According to research data, as of the end of July this year, 64 Tai Er stores had undergone renovation, with management expecting to reach 150 stores by year-end. Performance briefings disclosed that since July, renovated stores showed 10% growth in average daily sales compared to old stores, indicating initial effectiveness of store upgrades.

A staff member at a store in Shanghai's Century Avenue business district told reporters that renovated stores were first launched in Guangzhou and are currently mainly concentrated in South China, with their location not yet involved. "Upgraded stores feature live fish freshly killed." According to reviews on Dianping, among Shanghai's current 50 Tai Er stores, 13 have changed their main images to "Tai Er Fresh Live Upgrade," with some temporarily closed for upgrades.

Despite initial effectiveness of renovations, the market remains cautious about JIUMAOJIU's future development.

A research report from Everbright Securities International pointed out that considering future store closures, it has downgraded JIUMAOJIU's net profit forecasts for 2025-2027 to 100 million yuan, 110 million yuan, and 130 million yuan (compared to August 2024 forecasts of 290 million yuan, 320 million yuan, and 360 million yuan), lowering the target price from HK$3.7 to HK$3.0, and downgrading the rating from "Buy" to "Overweight."

As of September 11 close, JIUMAOJIU closed at HK$2.32, down 1.69%, with a total market capitalization of HK$3.243 billion.