Huachuang Securities: Chinese fast food ushered in a disruptive moment in the chain, giving the industry a “recommended” rating

The Zhitong Finance App learned that Zheshang Securities released a research report stating that it gave the Chinese fast food industry a “recommended” rating. The track that the bank is optimistic about is rice snacks > dry mixed noodles > fresh pasta pack+retail model: rice snacks are large-scale, the model is mature, and the price war accelerates the concentration of shares on strong supply chain players; dry mix noodle standardization genes are optimal and there is plenty of room for concentration improvement; the direction of pasta retailing is correct but relies on trust assets. The current market lacks differentiation between the pricing of high-quality companies and mediocre companies, and in the next round of recovery, high-quality companies will regain valuation premiums. Chinese fast food is one of the interpretive tracks of this framework. The industry is going through a price war and clearance stage, but it is an opportunity for leading companies with supply chain advantages to expand their share. In the medium term, Chinese fast food is expected to replicate the path of systematic pricing on tea racing tracks.

The main views of Huachuang Securities are as follows:

Fast food is a core asset that has been repeatedly proven by global capital markets in restaurant investment

Almost all overseas catering companies with large market capitalization are fast food companies, while China's 0.8 trillion yuan Chinese fast food market has a low securitization rate and low concentration. The market share of leading CR5 in 2024 was only 3.6%, which is a large gap with categories and no brands among major economies. Compared to the previous period, since 2024, Little Vegetable Garden, Green Tea, and Meet the Noodles have been listed one after another. Hometown Chicken and Yuan Ji Foods have been sold one after another, and the industry is gradually entering the capitalization stage.

The reason why Chinese fast food was scattered in the past

A well-developed and open wholesale supply chain allows husband and wife stores to obtain white-card operating capabilities, and densely populated settlements support the long-term survival of individual stores. Since 2020, the supply chain has been re-barred, self-built and deep-processing, traffic entry standardization, shopping center+takeout, franchise and digital store management tools have matured. The efficiency advantages of the chain model have begun to systematically surpass individual stores. The share is shifting from husband and wife stores to brand stores at a rate of 1-2 percentage points per year. This beta does not depend on the growth rate of the catering market, or even accelerated during the clean-up period of the industry.

Genes of a category determine the fate of a chain

Selected based on high-frequency immediate demand × supply chain can be standardized × taste adapted across regions: simple rice dishes and dry-mixed noodles are clearly the first tier, followed by pasta. Key company level: Meet Xiaomian is a verifier of the standardized paradigm on the noodle racetrack, which accurately fits the optimal intersection of “no soup/light soup+spicy type+industrial facial+light protein”; Yuan Ji Yun Dumpling uses a “freshly packed+raw and cooked” retail hybrid model to bypass the pasta value trap and has more than 4,000 stores; Hometown Chicken uses self-farming+central kitchen as a quality leader with the largest share of the Chinese fast food market. Spicy hot pot is the most thorough Chinese fast food chain category. Yang Guofu and Zhang Liang each have about 5,000 stores, but they have not been able to establish large market capitalization companies for a long time due to the high level of social supply chain and strong category mentality than brand mentality. It is the best mirror for standardization to solve replication and not differentiation; as the only large-scale listing sample on the pasta circuit, Babi Foods is essentially a central factory+cold chain+franchise supply chain export company. It is financially stable and defensive, but limited by the category ceiling with low customer unit prices for breakfast, and limited growth flexibility.

Risk warning: The food and beverage consumption boom falls short of expectations; takeout platform subsidy wars and peer price cuts continue to suppress customer unit prices and single-store profit models; food safety and quality control risks brought about by rapid franchise expansion. A single incident may have a nonlinear impact on brand mentality; the encryption of stores in core regions has led to same-store diversion.