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, Xiaobuxiang Group, has launched a nationwide rollout of its innovative "Selective Single Order + Unlimited Enjoyment" dual ordering model across 130 stores, enhancing consumer dining experiences [1][2] - The new menu features an expanded selection of 121 items, maintaining the same price for unlimited dining, thus providing more choices for consumers [1][2] Expansion of Dual Ordering Model - The dual ordering model was initially introduced in September in 46 stores across major cities like Beijing and Shanghai, receiving positive consumer feedback [2] - The unlimited dining menu has been significantly enriched, with the 158 RMB tier increasing from 87 to 94 items, the 198 RMB tier from 99 to 107 items, and the 258 RMB tier from 117 to 121 items [2] Menu and Product Upgrades - The core competitive advantage of Xiaobuxiang lies in its "rich broth" offerings, which now include the newly developed "Premium Taiwanese Spicy Chicken Feet Hot Pot" [3] - The menu has been enhanced with high-quality meat options and local specialty vegetables, showcasing a blend of national integration and regional characteristics [3] Supply Chain Management - The company employs a centralized control and regional operation supply chain management system, ensuring fresh ingredients and flexible menu options [3][4] - The sourcing strategy includes direct procurement from the source, with strategic partnerships established in quality production areas to ensure stable quality and cost advantages [3][4] Quality Control and Innovation - Xiaobuxiang Group controls the quality and safety of its ingredients through its own organic farms and vegetable bases, supported by a mature supply chain developed over nearly 30 years [4] - The continuous innovation in the dual ordering model and product matrix aims to provide consumers with a more flexible and diverse dining experience, reinforcing the brand's leadership in the hot pot industry [4]