HAIDILAO(HK:06862) Ge Long Hui·2025-07-21 03:15Company Overview - The company is currently focusing on optimizing customer and employee experiences, which may lead to short-term profit pressure, but it is expected that the peak summer season and operational improvements will drive recovery [1] - As of July, the table turnover rate has turned positive year-on-year, suggesting a need to continue monitoring the trend [1] Comments - The focus on enhancing customer and employee experiences has resulted in short-term profit margin pressure due to observed declines in internal operational management quality [1] - The company is implementing the "Different Haidilao" concept by creating diverse store environments, launching differentiated products, and restoring the supply of certain items, which may increase material costs [1] - Increased brand marketing investments, including celebrity endorsements and IP collaborations, aim to attract consumers [1] - Employee welfare investments have been increased since Q2 to enhance employee satisfaction and service quality, which may negatively impact short-term profit margins due to rising employee costs [1] Performance Insights - In the first half of 2025, the brand's table turnover rate is estimated to have declined by a high single-digit percentage year-on-year due to last year's high base, consumer environment pressures, and operational management quality issues [2] - However, the table turnover rate has shown positive growth since July, driven by the summer peak season and various adjustments [2] - The company has a strong organizational iteration capability and has historically managed to reverse difficult situations, indicating a positive long-term outlook [2] New Brand and Franchise Developments - The company is focusing on the "Pomegranate Plan" and franchise progress, with expectations of approximately 70 new "Yanqing" barbecue stores by the end of June and around 100 by year-end [2] - The company plans to enhance service quality at existing stores while moderating the pace of new openings [2] - The franchise business is steadily advancing, with an estimated 25 direct stores transitioning to franchises in the first half of 2025 and approximately 41 franchise stores by the end of June [2] Profit Forecast and Valuation - Due to the short-term profit pressure from optimizing customer and employee experiences, the net profit estimates for 2025 and 2026 have been reduced by 17% and 12% to 4.15 billion and 4.81 billion respectively [2] - The current stock price corresponds to 17x and 15x P/E for 2025 and 2026 [2] - The target price has been lowered by 18% to 16 HKD, reflecting a potential upside of 15% based on 20x and 17x P/E for 2025 and 2026 [2]