Core Viewpoint - The company is experiencing operational pressure but has significantly reduced losses in H1 2025, with a focus on brand adjustments and internal partnership models to stabilize and expand store presence [1][2] Group 1: Financial Performance - In H1 2025, the company achieved revenue of 1.942 billion yuan, a year-on-year decrease of 18.88%, with the brand "Xiabuxiabu" generating 1.135 billion yuan (down 13.5%) and "Coucou" generating 745 million yuan (down 25.8%) [1] - The net profit attributable to the parent company was -84 million yuan, a significant reduction from -272 million yuan in the same period last year, primarily due to improved raw material costs and reduced asset impairment losses [1] Group 2: Store Operations - As of H1 2025, "Xiabuxiabu" had a total of 763 stores, with a distribution of 42.6% in first-tier cities, 41.0% in second-tier cities, 16.0% in third-tier and below, and 0.4% overseas; the number of stores decreased by 63 year-on-year but increased by 3 compared to the end of 2024, indicating stabilization [1] - The company has implemented improvements in "Xiabuxiabu" stores, including promoting a small store model and controlling engineering costs, resulting in an overall turnover rate of 2.6 times, up from 2.3 times last year [1] - The "Coucou" brand had a total of 174 stores, with a year-on-year decrease of 71 stores, indicating it is still in a closure phase; the turnover rate for "Coucou" was 1.4 times, down from 1.6 times last year [2] Group 3: Strategic Initiatives - The company began implementing an internal partnership system for "Xiabuxiabu" in July 2025, with 5 partnership stores currently operating, showing better operating profit margins compared to regular stores; the company plans to add 60 partnership stores by the end of 2026 [1] - "Coucou" is undergoing a painful adjustment phase, with a new "dual-point" model being tested, which has shown significantly better performance than regular stores, and plans to roll it out to all mainland stores [2] Group 4: Ratings and Future Outlook - The company maintains a "Hold" rating with a target price of 1.15 HKD per share, reflecting a potential upside of 17.3% from the current price; projected net profits for 2025-2027 are expected to be -242 million yuan, -21 million yuan, and 11 million yuan respectively [2]

Investment Rating - The report maintains a "Hold" rating for the company with a target price of HKD 1.15 per share, indicating a potential upside of 17.3% from the current price of HKD 0.98 [6][17]. Core Insights - The company has experienced significant operational pressure in recent years, but it has managed to reduce losses substantially in the first half of 2025, with a net loss of HKD 0.84 billion compared to HKD 2.72 billion in the same period last year. This improvement is attributed to lower raw material costs and reduced asset impairment losses [8][6]. - The company has initiated an internal partnership system aimed at stabilizing and expanding its store network, with plans to add 60 partnership stores by the end of 2026. Currently, there are 763 stores under the main brand, with a slight increase in the number of stores compared to the end of 2024 [4][11]. - The "Couch" brand is under significant pressure, currently in a phase of store closures, with a total of 174 stores as of the first half of 2025. The brand's same-store sales have declined by 14.0% [5][12]. Summary by Sections Financial Performance - For the first half of 2025, the company reported total revenue of HKD 19.42 billion, a year-on-year decrease of 18.88%. The main brand contributed HKD 11.35 billion, down 13.5%, while the "Couch" brand generated HKD 7.45 billion, down 25.8% [8][6]. - The company expects net profits for 2025 to be -HKD 2.42 billion, improving to -HKD 0.21 billion in 2026, and turning positive with HKD 0.11 billion in 2027 [6][17]. Store Network and Strategy - As of the first half of 2025, the company operates 763 stores, with a breakdown of 42.6% in first-tier cities, 41.0% in second-tier cities, and 16.0% in lower-tier cities. The store count has stabilized, with a net increase of 3 stores compared to the end of 2024 [4][10]. - The company has implemented a "dual-point" model for the "Couch" brand, which has shown promising results, with a 49% increase in performance compared to traditional stores [12][5]. Cost Management - The company has seen a reduction in raw material costs by 22.5% to HKD 6.41 billion, contributing to an improved cost-to-revenue ratio of 33.02% [8][6]. - Employee costs have decreased by 18.1% to HKD 6.67 billion, with a reduction in workforce from 24,606 to 17,930 employees [8][6].

Core Insights - The company Xiapu Xiapu has launched the "Feng Huan Chao" plan, allowing internal employees to become partners in new stores, with 21 partners already signed and 5 stores operational [1][6][8] - The shift to a partnership model is seen as a strategic move to regain growth amidst a competitive market, with plans to add 50 to 100 partner stores annually [1][2][8] - The restaurant industry is transitioning from direct management to a combination of partnership and franchise models, indicating a search for new growth drivers [3][7] Company Strategy - The "Feng Huan Chao" plan employs a "three-party shared equity" model, where partners, the company, and executives share ownership of the stores, promoting risk-sharing and profit-sharing [4][6] - The company provides comprehensive support to partners, including brand authorization, supply chain assurance, and operational guidance, allowing them to focus on optimizing business performance [5][6][8] - The plan aims to align the interests of frontline employees with store performance by offering a profit-sharing model, with 30% to 40% of store profits allocated to operational staff [6][8] Industry Context - The hot pot market is projected to reach a size of 617.5 billion yuan in 2024, with a growth rate of 5.6%, but the pace is slowing compared to previous years [2] - The number of hot pot restaurants is expected to peak at 535,500 in Q3 2024 before declining, reflecting a shift in consumer spending habits [2] - The trend of partnership models in the restaurant industry is gaining traction, with successful examples like Mi Cun Ban Fan and Xi Jia De demonstrating the potential for rapid expansion [3][7]

Core Insights - Major hot pot brands are actively expanding their business models, with Haidilao continuing to incubate sub-brands and Banu submitting an IPO application to become the "third hot pot stock" [1] - Xiaobuxiang, the "first hot pot stock," has launched the "Feng Huan Chao" partner program aimed at outstanding internal employees and industry talents, with plans to open 50 to 100 new partner stores annually [1][2] Company Initiatives - The "Feng Huan Chao" partner program incentivizes frontline employees who contribute significantly to store growth, allowing them to share in store profits through a partnership model [1][2] - The first batch of 21 partners has signed contracts, with 5 partner stores already operational [1] - Xiaobuxiang will provide comprehensive support to partners, including brand authorization, supply chain assurance, and management standards, ensuring consistency in brand image and service quality [2] Industry Trends - The trend of opening franchise and partnership models is growing among leading restaurant brands, with Haidilao and Jiumaojiu also adopting similar strategies [3] - The increasing chain rate in China's restaurant industry, along with improved brand management and supply chain standardization, is driving the shift from direct operation to franchise models [3] - The internal partnership model is becoming popular, transforming employees from traditional roles into partners who share risks and profits, enhancing their engagement and performance [3]