不破不立，征程再启

Investment Rating - The report gives a "Buy" rating to Haidilao (06862 HK) with a target price of HKD 19 88 per share based on a 20x PE multiple for 2024 [4] Core Views - Haidilao is the leader in the hotpot industry with a 30-year history and a market share ranking first in the industry As of the end of 2023 the company operated 1 374 Haidilao restaurants serving nearly 400 million customers [2] - The company has optimized its store model and improved operational efficiency after the "Woodpecker Plan" which involved closing or suspending some underperforming stores The turnaround rate reached 3 8 times in 2023 up 0 8 times year-on-year [2] - Haidilao's management model is a key driver of its success with a focus on employee incentives and decentralized decision-making This has enabled the company to maintain high service standards and innovate continuously [2] - The company has significant room for expansion in mainland China and is exploring new store formats themes and product categories to drive future growth [2] - The report forecasts Haidilao's net profit to grow by 13 7% 10 8% and 10 2% year-on-year from 2024 to 2026 reaching RMB 5 12 billion RMB 5 67 billion and RMB 6 25 billion respectively [2] Financial Summary - Revenue for 2023 was RMB 41 45 billion up 33 6% year-on-year with EBITDA of RMB 8 80 billion and net profit of RMB 4 50 billion a 227 3% increase [3] - The company's ROE was 39 0% in 2023 and is expected to remain strong at 31 9% 27 0% and 23 7% from 2024 to 2026 [3] - EPS for 2023 was RMB 0 83 and is projected to grow to RMB 0 92 RMB 1 02 and RMB 1 12 from 2024 to 2026 [3] Industry Overview - The hotpot industry is the largest segment in the Chinese dining market accounting for 14% of the total Chinese dining market in 2022 The market size reached RMB 529 3 billion in 2023 with Sichuan-style hotpot being the dominant category [18][19] - The industry is highly fragmented with the top five players accounting for less than 10% of the market Haidilao leads with a 5 8% market share in 2020 [31] - Hotpot is a highly standardized and scalable dining category with a strong social dining appeal making it suitable for chain expansion The industry's chain rate was 20 7% in 2021 higher than the overall dining industry's 18% [23] Company Overview - Haidilao was founded in 1994 and has grown to become a leading hotpot chain with 1 374 stores globally as of 2023 The company serves nearly 400 million customers annually and has 150 million registered members [36] - The company has gone through four stages of development: exploration (1994-2009) management transformation (2010-2016) rapid expansion (2017-2020) and operational adjustment (2021-present) [38] - Haidilao's core business is restaurant operations which accounted for over 95% of its revenue in 2023 Other businesses include delivery and condiment sales [43] Competitive Advantages - Haidilao's management model emphasizes employee incentives and decentralized decision-making enabling the company to maintain high service standards and innovate continuously [54] - The company's "mentorship system" encourages talent development and store expansion with store managers incentivized to train new managers and share in the profits of their mentees' stores [56] - Haidilao's service is a key differentiator with a focus on personalized and attentive customer experiences The company has also invested in technology to enhance the dining experience such as DIY hotpot bases and smart dining systems [63][64] Future Growth Drivers - Haidilao has significant room for expansion in mainland China with a focus on optimizing its store model and exploring new formats and themes [2] - The company is also exploring new growth opportunities such as night economy services and concert-related dining experiences to capture emerging consumer trends [66] - Haidilao's introduction of a franchise model in 2024 is expected to further accelerate its expansion and diversify its revenue streams [38]