Macro and Strategy - The equity market is currently in an accelerating upward phase, prompting discussions on how to adjust positions to prepare for potential market fluctuations [8] - Investors are advised to consider right-side position reduction as a more reasonable choice, given the current market dynamics [8] - Historical data suggests that low-priced convertible bonds (priced between 110-115 yuan) tend to be more resilient during market downturns [8] Company and Industry Analysis - **Dengkang Dental (001328.SZ)**: The company reported a stable growth in Q2 2025, with revenue reaching 842 million yuan, a year-on-year increase of 19.72%, and a net profit of 85 million yuan, up 17.59% [10][11] - **Marubi Biotechnology (603983.SH)**: The company achieved a revenue of 1.769 billion yuan in H1 2025, a 30.83% increase year-on-year, while net profit grew by 5.21% to 186 million yuan [13][14] - **Haidi Lao (06862.HK)**: The company reported a revenue of 20.7 billion yuan in H1 2025, a decrease of 3.7%, with core operating profit down 14% [17][18] - **Green Tea Group (06831.HK)**: The company achieved a revenue of 2.29 billion yuan in H1 2025, a 23.1% increase, with adjusted net profit rising by 40% [19][20] - **Haisco Pharmaceutical (002653.SZ)**: The company reported a revenue of 2 billion yuan in H1 2025, an 18.6% increase, with anesthetic product revenue growing by 54% [22][23] - **Furui Co., Ltd. (300049.SZ)**: The company achieved a revenue of 713 million yuan in H1 2025, an 11.02% increase, while net profit was impacted by foreign exchange losses [26][27] - **Kaili Medical (300633.SZ)**: The company reported a revenue of 964 million yuan in H1 2025, a decrease of 4.78%, with net profit down 72.43% due to high initial investments in new product lines [29][30] - **Yuyue Medical (002223.SZ)**: The company reported a revenue of 4.659 billion yuan in H1 2025, an 8.2% increase, with net profit rising by 7.4% [31][32]

Core Insights - The company reported a decline in core operating profit by 14% in H1 2025, with total revenue at 20.7 billion yuan, down 3.7% [1] - The main business of hot pot generated revenue of 18.58 billion yuan, a decrease of 9.0%, accounting for 89.7% of total revenue [1] - The takeaway business saw significant growth, with revenue increasing by 59.6% to 930 million yuan, now representing 4.5% of total revenue [1] Revenue Breakdown - Hot pot main business revenue: 18.58 billion yuan, down 9.0% [1] - Takeaway business revenue: 930 million yuan, up 59.6% [1] - Other restaurant business revenue: 600 million yuan, up 227.0% [1] - Sales of condiments and ingredients: 460 million yuan, up 55.0% [1] - Franchise business revenue: 90.85 million yuan, up 227.0% [1] Same-store Performance - Same-store revenue declined by 9.9%, with a turnover rate of 3.8 times per day, down 9.5% [1] - Overall average spending per customer was 97.9 yuan, up 0.5% [1] - Turnover rates in different city tiers showed slight variations, with first-tier cities at 3.8 times per day, down 0.2 times [1] Store Expansion and Brand Development - As of June 2025, the total number of hot pot stores was 1,363, a net decrease of 5 stores since the beginning of the year [2] - The company is cautiously expanding its hot pot business while actively growing its sub-brands, with a net increase of 46 stores in the barbecue brand [2] - The company operates a total of 14 restaurant brands with 126 locations [2] Profitability and Financial Metrics - Gross margin decreased by 0.8 percentage points due to increased portion sizes to enhance dining experience [2] - Employee compensation as a percentage of revenue increased by 0.5 percentage points, reflecting fixed cost pressures [2] - Net profit margin stood at 8.5%, down 1.0 percentage points [2] Dividend Policy - The company maintained a high cash dividend payout ratio of 95%, distributing 0.309 yuan per share [2]

Investment Rating - The investment rating for the company is "Outperform the Market" [5][15][16] Core Views - The company reported a decline in core operating profit by 14% in H1 2025, with revenue of 20.7 billion yuan, down 3.7% year-on-year. The core operating profit was 2.41 billion yuan, a decrease of 14%, and the net profit attributable to shareholders was 1.76 billion yuan, down 13.7% [1][7] - The hot pot business faced revenue pressure, with a 9% decline to 18.58 billion yuan, accounting for 89.7% of total revenue. However, the takeaway business saw significant growth, with revenue increasing by 59.6% to 930 million yuan, now the second-largest revenue source [1][7] - The company maintains a high cash dividend payout ratio of 95%, distributing 0.309 yuan per share, consistent with the previous year [3][15] Revenue and Profitability - For H1 2025, the company experienced a slight decline in gross margin by 0.8 percentage points due to increased portion sizes to enhance dining experience. Employee compensation as a percentage of revenue increased by 0.5 percentage points, while other expenses rose by 1.1 percentage points, primarily due to increased takeaway costs [3][13] - The overall net profit margin was 8.5%, down 1 percentage point year-on-year [3][13] Store Expansion and Performance - As of June 2025, the total number of hot pot restaurants was 1,363, a net decrease of 5 from the beginning of the year, indicating a cautious expansion strategy. The company operates 14 restaurant brands with a total of 126 restaurants, including a significant increase in the barbecue brand, which added 46 new locations [2][9][13] Future Outlook - The company has adjusted its net profit forecasts for 2025-2027 to 4.22 billion, 4.75 billion, and 5.42 billion yuan, respectively, reflecting a downward adjustment of 22% for each year. The expected price-to-earnings ratios for these years are 17.9, 15.9, and 13.9 times [3][15] - The outlook remains positive as the hot pot business is expected to recover with normalized turnover rates and steady increases in customer spending, alongside contributions from the "Red Pomegranate" initiative and takeaway services [3][15]