During the Spring Festival, the demand for catering increased sharply, and Guoquan, which is based on the "eating at home" track, attracted the attention of investors.
It is understood that from the first to the sixth day of the Lunar New Year in 2024, Haidilao received a total of more than 9.5 million customers, a year-on-year increase of more than 30%. During the same period, the turnover rate of many Banu Maodu Hotpot stores exceeded 9 times. Taking advantage of this craze, during the Spring Festival, the stock price of Guquan went up all the way, rising from a low of HK$7.4/share to HK$8.25/share, an increase of 11.49%. On February 16, Guoquanâs stock price rose as much as 7.14% in a single day.
Picture source: Baidu
However, it is worth noting that overall, , Guoquanâs stock price has not continued a steady upward trend . On November 2, 2023, Guoquan landed on the Hong Kong Stock Exchange, with an issue price of HK$5.98/ The stock reached a high of HK$12.34 per share on January 29, 2024. Subsequently, Guoquan's stock price staged a "high dive" and went all the way down. On February 19, Guoquanâs share price plummeted 13.94% to close at HK$7.1 per share, just one step away from falling below the issue price.
The reason why the capital market treats Guoquan with caution is mainly because after bid farewell to the epidemic dividend, Guoquan is facing the challenges of peaking revenue scale and increasing franchise store closure rate . If these problems cannot be solved in time, it will obviously be difficult for investors to have enough confidence in the market just by relying on sporadic epidemics and Spring Festival bonuses.
Catching up with the dividends of the epidemic, Guoquan is growing fiercely
As we all know, the three-year epidemic has brought a huge blow to Chinaâs catering industry. However, because it focuses on âeating at homeâ, it can greatly avoid the impact of the epidemic, Guoquan has ushered in its own own "golden age". The
prospectus shows that from the end of 2020 to the end of 2022, the number of Guoquan stores was 4,300, 6,868 and 9,221 respectively, with year-on-year growth of 59.72% and 34.26% respectively in the next two years. The reason why
Guoquan can quickly open a large number of stores is closely related to the industryâs boom in dividends and the strong support of capital.
Source: China Business Industry Research Institute
After the epidemic, Chinaâs âeating at homeâ market has grown rapidly. Data from the China Business Industry Research Institute shows that in 2020, China's "eating at home" market size was 265.3 billion yuan, a year-on-year increase of 35.03%. In this context, many investment institutions have invested in âeating at homeâ related projects.
Source: Guoquan prospectus
As a pioneer in the âeating at homeâ track, Guoquan is naturally a guest of capital. Data disclosed in the prospectus show that since 2019, Guoquan has received a total of five rounds of financing, with a cumulative financing amount of 2.83 billion yuan, four of which occurred after 2020, accounting for 97.53% of the total financing amount.
has a financial backer "blood transfusion" behind the scenes, so Guoquan can blindly rush to regardless of the cost. The prospectus shows that from 2020 to 2022, Guoquanâs net profits were -43 million yuan, -461 million yuan and 230 million yuan respectively.
Regarding why it has suffered losses for two consecutive years in 2020 and 2021, Guoquan explained in the prospectus that it was mainly due to "the growth of manpower and the investment of resources in promotional activities for franchisees." Although
has suffered losses for two consecutive years, as the number of stores increases, Guoquanâs revenue has increased rapidly. The prospectus shows that from 2020 to 2022, Guoquanâs revenue was 2.965 billion yuan, 3.958 billion yuan and 7.174 billion yuan respectively, with year-on-year growth of 33.5% and 81.2% respectively in the next two years.
Fortunately, as the scale of stores gradually increases and a scale effect is formed, Guoquan not only gets out of the quagmire of losses in 2022, but the core gross profit margin data also rises steadily. The prospectus shows that from 2020 to 2022, the gross profit margin of Guquan will be 11.1%, 9.0% and 17.4% respectively.
In the post-epidemic era, Guoquan franchisees are facing losses
In the past few years, the reason why Guoquan has focused on expanding the scale of its stores is mainly because franchise stores are its important revenue pillar.. The prospectus shows that from 2020 to 2022, Guoquan franchise store channel revenue was 2.91 billion yuan, 3.73 billion yuan and 6.48 billion yuan respectively, accounting for 98.2%, 94.2% and 90.3% of the total revenue respectively.
However, it should be noted that the Guoquan franchise stores in previous years were opened based on the "eat at home" bonus during the epidemic period. Since consumers are not allowed to dine in offline stores during the epidemic, Guoquan's massive franchise stores can certainly achieve outstanding results.Since the end of 2022, as the epidemic has subsided and the offline economy has gradually recovered, consumers' demand for "eating at home" has dropped sharply. Many Guoquan franchise stores have begun to face tremendous pressure for survival.
Source: Guoquan Prospectus
Prospectus shows that from 2020 to 2022, Guoquan franchise stores will close 28, 194 and 279 stores respectively, with store closure rates of 0.7%, 2.8% and 3.0% respectively. In the first four months of 2023, 132 Guoquan franchise stores closed, nearly half of the number in the whole of 2022.
For Guoquan, hundreds of franchise stores are closed every year, which may not be harmful, but for franchisees, once a store with huge investment is closed, it may cause huge losses.
In April 2023, "Leopard Change" reported that a Hangzhou franchisee opened a Guoquan in April 2022. Before opening the store, the headquarters said that it would cost 300,000 to open the store, but it actually cost 400,000. Due to poor performance, the store was sold for NT$250,000 in December, resulting in a loss of NT$150,000 in 8 months.
In sync with the increase in store closing rates, the inventory value of Guquan is also increasing, reaching 647 million yuan, 602 million yuan and 1.047 billion yuan respectively from 2020 to 2022. This shows from the side that Guoquan is not only facing the challenge of helping franchisees generate income, but is also stuck in a quagmire of difficulty in shipping goods efficiently.
has entered 2023. As the epidemic has completely disappeared, Guoquanâs performance has even declined year-on-year. The prospectus shows that in the first four months of 2023, Guoquanâs revenue was 2.078 billion yuan, a year-on-year decrease of 3.8%; net profit was 119 million yuan.
Regarding the reason for the decline in revenue, Guoquan explained in the prospectus, "Part of the reason is that people eat out more frequently after the epidemic subsides."
Apart from hot pot and barbecue, Guoquan has no new stories
It is undeniable that , three years after the epidemic, China's "eating at home" market has grown rapidly, but overall, to this day, the "eating at home" market still plays a marginal role in the overall catering industry.
Source: iiMedia Consulting
Data disclosed by iiMedia Consulting shows that in 2023, Chinaâs catering market size will be 5,188.6 billion yuan. During the same period, Chinaâs home meal solutions market size will be only 441.1 billion yuan, accounting for only 8.5%. The
prospectus shows that in 2022, Guoquan will rank first in China in terms of retail sales of home meal solution products, accounting for 3% of the market share. Combining the previous data, it is not difficult to find that due to the limited market size, even though it has become an industry leader, Guoquan still faces the challenge of stalling.
In order to expand market influence, Guoquan has been committed to aggressive marketing of in the past few years. The prospectus shows that from 2020 to 2022, the sales and distribution expenses of Guquan will be 220 million yuan, 629 million yuan and 625 million yuan respectively, accounting for 7.4%, 15.9% and 8.7% of the revenue respectively.
However, combined with the increasing store closing rate of Guoquan and the declining revenue in the first four months of 2023, Guoquanâs generous marketing strategy has obviously not achieved the desired results .
Source: Prospectus
In sync with the aggressive marketing, Guoquan is also committed to getting rid of its dependence on hot pot, barbecue and other products. The prospectus shows that the main revenue pillar of Guoquan is hot pot and barbecue products, which accounted for about 90% of the total revenue in the past few years.
In order to find a new growth curve, Guoquan has launched the fast food brand "Hanhan" in the past few years, as well as products such as coconut chicken hot pot and fat beef enoki mushroom rolls.
Unfortunately, the emerging products of Guoquan have not fully won the attention of consumers to . The prospectus shows that from 2020 to 2022, Guoquanâs other productsâ revenue accounted for 12%, 12.5% ââand 13.8% respectively. The revenue proportion has been stagnant for many years, making it difficult to become the companyâs âsecond curveâ.
All in all, although Guoquanâs performance has steadily increased in the past few years, this is largely due to the dividends of the epidemic and the large number of franchise stores supported by capital.
Since 2023, as the epidemic has gradually subsided, Guoquanâs performance has shown signs of peaking, and the store closure rate has continued to rise, ushering in a troubled year.
In this context, it is difficult for the capital market to continue to be optimistic about the pot circle. As the Spring Festival dinner bonuses gradually fade away, investors naturally flee the market.
