MITA SECURITIES Equity Research September 2, 2021 MITA SECURITIES Co., Ltd. Ohsho Food Service Junichi Shimizu Chief Analyst, Head of Research TSE 1st Section 9936 Industry: Food service, retail [email protected] August sales, industry update Update Monthly data for August: affected by the expansion of shortened hours areas Rating Ohsho Food Service (9936, the company) disclosed monthly data for its directly-owned Buy stores for August (on a preliminary basis). Same-store sales were 91.4% YoY (same month last yar = 100%; 104.6% for July). The number of holidays (weekends and national holidays) Target price (JPY) 7,250 was one less than in August 2020. The breakdown is as follows: number of customers 88.8% Stock price (JPY) (Sep 2) 5,930 (99.1% for July); average spend per customer 102.9% (105.5% for July). Market cap (JPYbn) 138.1 Same-store sales were 87.6% of August 2019 figure (our estimate; 98.2% for July). The Key changes number of holidays was the same as in August 2019. Rating No Target price No The weakness of the August numbers compared to July appears to be a trend similar to Earnings forecast No that of restaurant operators in general. In August, the areas subject to emergency Stock price (JPY) measures and priority measures to prevent the spread of the disease were expanded, and 8,000 restaurants in these areas were requested to shorten their hours and stop serving alcohol. 7,500 7,000 (the company operated normally in August 2020). According to the company, sales 6,500 between 5:00 am and 8:00 pm (the hours not subject to the request for shorter hours) 6,000 5,500 were 107.9% of the same month last year, a significantly strong figure. In addition, the 5,000 takeout/delivery ratio reached 46.4%, the company said. 4,500 9936 JT Equity 4,000 8/20 7/21 1/20 2/20 3/20 4/20 5/20 6/20 7/20 9/20 1/21 2/21 3/21 4/21 5/21 6/21 8/21 11/19 10/20 11/20 12/20 In August, there were no store openings or closings. The total number of stores at the end 12/19 of August was 526 directly-owned stores and 204 FC stores. Source: Bloomberg Finance LP Same-store sales for other restaurant companies: weaker than in July in general Earnings The following is a list of restaurant operators that have already disclosed their August 3/20 3/21 3/22E 3/23E 3/24E same-store sales YoY. Sales JPYbn 85.6 80.6 88.4 94.2 96.9 OP JPYbn 7.7 6.1 7.5 8.8 9.1 RP JPYbn 8.1 6.9 8.8 9.2 9.4 ◼ Skylark HD (3197): 83.3% (July: 100.3%) NP JPYbn 5.3 4.3 5.5 5.9 6.1 EPS JPY 283.0 228.4 295.1 315.9 323.9 ◼ Food & Life Companies (3563): Sushiro 96.4% (July: 103.5%) BPS JPY 2,681 2,821 3,016 3,212 3,396 DPS JPY 120.0 100.0 120.0 140.0 150.0 ◼ Royal HD (8179): Royal Host 85.9% (July: 97.2%); Tendon Tenya 104.3% (July: 114.1%) PER x 20.4 25.5 20.1 18.8 18.3 PBR x 2.2 2.1 2.0 1.8 1.7 ◼ Zensho HD (7550): Sukiya 100.5% (July: 108.7%) Div. yield % 2.1 1.7 2.0 2.4 2.5 ◼ Saizeriya (7581): 83.4% (July: 101.1%) ROA % 8.1 5.4 6.0 6.2 6.4 ROE % 10.9 8.3 10.1 10.1 9.8 ◼ Genki Sushi (9828): 90.8% (July: 105.6%) ◼ Matsuya Foods HD (9887): Matsuya 95.9% (95.5%) Source: Company data, Mita Securities Recapitalization of restaurant operators: entering the second lap Company profile During August, the following were announced: a public offering of new shares by Colowide Ohsho Food Service is a Kyoto-based restaurant company that operates the (7616), subordinated loan borrowing by Kourakuen HD (7554), and the issuance of largest Chinese restaurant chain “Gyoza no warrants by Kisoji (8160). Create Restaurants HD (3387) registered a new share issue in Ohsho” nationwide. 734 restaurants (528 July, but no further updates were made during August. Colowide just issued preferred stock directly owned, 206 franchised) at the end last year, and Create Restaurants HD just took out an undated subordinated loan this year. of FY3/21. Sales of 80.6bn yen in FY3/21. The recapitalization of restaurant operators is entering its second lap. Take-out and delivery sales are strong. Please refer to the report dated June 22, 2021 for the rationale of the rating and target price. MITA SECURITIES Co., Ltd. / 3-11 Nihonbashi Kabuto-cho, Chuo-ku, Tokyo, Japan 1 PLEASE SEE APPENDIX FOR ANALYST CERFICITATION AND INPORTANT DISCLOSURES. Ohsho Food Service (9936) September 2, 2021 Ohsho Food Service’s monthly data Figure: Directly-owned, same-store sales Figure: Directly-owned, same-store number of customers Same-store sales Same-store number of customers 130.0 130.0 120.0 120.0 110.0 110.0 100.0 100.0 90.0 90.0 80.0 80.0 70.0 70.0 60.0 60.0 6/19 4/18 6/18 8/18 2/19 4/19 8/19 2/20 4/20 6/20 8/20 2/21 4/21 6/21 8/21 8/20 4/18 6/18 8/18 2/19 4/19 6/19 8/19 2/20 4/20 6/20 2/21 4/21 6/21 8/21 10/18 12/18 10/19 12/19 10/20 12/20 10/18 12/18 10/19 12/19 10/20 12/20 vs last year vs year before last vs last year vs year before last Source: Company data, Mita Securities Note: Same month last year or year before last = 100 Source: Company data, Mita Securities Note: Same month last year or year before last = 100 Figure: Directly-owned, same-store ave spend per customer Figure: Directly-owned, all-store sales (JPYm) 7,500 Same-store average spend per customer 130.0 7,000 120.0 6,500 110.0 100.0 6,000 90.0 5,500 80.0 70.0 5,000 60.0 4,500 4/21 6/18 8/18 2/19 4/19 6/19 8/19 2/20 4/20 6/20 8/20 2/21 6/21 8/21 4/18 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 10/18 12/18 10/19 12/19 10/20 12/20 vs last year vs year before last FY3/19 FY3/20 FY3/21 FY3/22 Source: Company data, Mita Securities Note: Same month last year or year before last = 100 Source: Company data, Mita Securities 2 Ohsho Food Service (9936) September 2, 2021 Food service companies’ same-store sales (compared to last year or year before last) Figure: Family restaurants Figure: Sushi restaurants 120.0 140.0 110.0 130.0 100.0 120.0 110.0 90.0 100.0 80.0 90.0 70.0 80.0 60.0 70.0 50.0 60.0 40.0 50.0 30.0 40.0 4/19 7/19 10/19 1/20 4/20 7/20 10/20 1/21 4/21 7/21 4/19 7/19 10/19 1/20 4/20 7/20 10/20 1/21 4/21 7/21 Skylark Skylark Saizeriya Sushiro Sushiro Kura Sushi Kura Sushi Saizeriya Royal Host Royal Host Kappa Sushi Kappa Sushi Genki Sushi Genki Sushi Source: Companies data, Mita Securities Note: Solid line vs last yr, dotted line vs yr before last Source: Companies data, Mita Securities Note: Solid line vs last yr, dotted line vs yr before last Figure: Izakaya (Japanese style pubs) Figure: Chinese restaurants 110.0 120.0 100.0 110.0 90.0 80.0 100.0 70.0 90.0 60.0 80.0 50.0 40.0 70.0 30.0 60.0 20.0 50.0 10.0 0.0 40.0 4/19 7/19 10/19 1/20 4/20 7/20 10/20 1/21 4/21 7/21 4/19 7/19 10/19 1/20 4/20 7/20 10/20 1/21 4/21 7/21 Torikizoku Torikizoku SFP SFP Ohsho FS Ohsho FS Hiday Hidaka Hiday Hidaka Watami Watami Chimney Chimney Kourakuen Kourakuen Ringer Hut Ringer Hut Source: Companies data, Mita Securities Note: Solid line vs last yr, dotted line vs yr before last Source: Companies data, Mita Securities Note: Solid line vs last yr, dotted line vs yr before last Figure: Yakiniku (Japanese BBQ), steak Figure: Monogatari Corporation by division 130.0 140.0 120.0 130.0 110.0 120.0 100.0 110.0 90.0 100.0 90.0 80.0 80.0 70.0 70.0 60.0 60.0 50.0 50.0 40.0 40.0 30.0 30.0 20.0 20.0 10.0 10.0 0.0 0.0 4/19 7/19 10/19 1/20 4/20 7/20 10/20 1/21 4/21 7/21 4/19 7/19 10/19 1/20 4/20 7/20 10/20 1/21 4/21 7/21 Monogatari Corp (yakiniku) Monogatari Corp (yakiniku) Monogatari Corp Monogatari Corp Amiyaki Tei Monogatari Corp (ramen) Monogatari Corp (ramen) Monogatari Corp (okonomiyaki) Monogatari Corp (okonomiyaki) Amiyaki Tei PFS (Ikinari ! Steak) PFS (Ikinari ! Steak) Monogatari Corp (Yuzuan) Monogatari Corp (Yuzuan) Source: Companies data, Mita Securities Note: Solid line vs last yr, dotted line vs yr before last Source: Companies data, Mita Securities Note: Solid line vs last yr, dotted line vs yr before last 3 Ohsho Food Service (9936) September 2, 2021 Figure: Coffee shops Figure: Hamburger shops 120.0 140.0 110.0 130.0 100.0 90.0 120.0 80.0 110.0 70.0 60.0 100.0 50.0 90.0 40.0 80.0 30.0 4/19 7/19 10/19 1/20 4/20 7/20 10/20 1/21 4/21 7/21 4/19 7/19 10/19 1/20 4/20 7/20 10/20 1/21 4/21 7/21 Komeda Komeda Doutor Coffee Doutor Coffee McDonald's McDonald's Mos Burger Mos Burger Source: Companies data, Mita Securities Note: Solid line vs last yr, dotted line vs yr before last Source: Companies data, Mita Securities Note: Solid line vs last yr, dotted line vs yr before last Figure: Beef bowl Figure: Set meal, Udon noodle, Curry, Tempura 120.0 120.0 115.0 110.0 110.0 100.0 105.0 100.0 90.0 95.0 80.0 90.0 70.0 85.0 60.0 80.0 75.0 50.0 70.0 40.0 4/19 7/19 10/19 1/20 4/20 7/20 10/20 1/21 4/21 7/21 4/19 7/19 10/19 1/20 4/20 7/20 10/20 1/21 4/21 7/21 Matsuya Matsuya Zensho (Sukiya) Ootoya Ootoya Toridoll Toridoll Ichibanya Ichibanya Zensho (Sukiya) Yosihoya Yosihoya Tendon Tenya Tendon Tenya Source: Companies data, Mita Securities Note: Solid line vs last yr, dotted line vs yr before last Source: Companies data, Mita Securities Note: Solid line vs last yr, dotted line vs yr before last 4 Ohsho Food Service (9936) September 2, 2021 Comparison of valuations with similar companies (reference) Figure: Comparison of valuations for food service companies Company name Ticker PX Mkt cap Net D/E Sales YoY EBITDA Mgn ROE ROE ROE PER PER PER PBR EV/EBITDA EV/Sales Div yield 1M 3M 1YR 9/1 JPYbn Last LTM LTM LTM Cur E Nxt E LTM Cur E Nxt E Last Cur E Cur E Cur E Chg Chg Chg KURA SUSHI INC 2695 4,235 175.3 -0.1 7.4 4.6 3.1 8.3 12.3 122.7 43.8 27.4 3.7 14.8 1.2 0.6 3.7 7.1 76.1 MCDONALD'S HOLDINGS CO JAPAN 2702 5,180 688.7 -0.2 5.6 14.8 12.7 12.0 11.9 31.4 30.5 27.2 3.8 13.0 2.0 0.7 4.4 4.9 0.4 OOTOYA HOLDINGS