Flash | 14 Dec 2025 23:19:17 ET │ 11 pages Haidilao International Holding Ltd (6862.HK) Reiterated Top Buy in China Restaurant Sector; Stabilized Nov restaurant retail sales CITI'S TAKE On Dec 15, NBS released China retail sales data in Nov. YoY growth of China restaurant retail sales stabilized at 3.2% in Nov (vs 3.8% YoY growth in Oct). The 3%-4% YoY growth of China restaurant retail sales in Oct-Nov was noticeably well above the 0.9%-2.1% YoY in Jun-Sept 2025 (when subsidy competition among e-commerce pl ...

Vi e w p o i n t | 27 Nov 2025 22:58:53 ET │ 48 pages China Consumer Sector Top Buys with Five Investment Themes CITI'S TAKE After hosting 44 China consumer companies during Citi's 2025 China Conference in Nov, we have identified 5 themes of investing in China consumer sector (detailed below). Our updated sector Top Buys -- In Consumer-Discretionary space: Anta (2020.HK), Pop Mart (9992.HK), Atour (ATAT.O), Haier (6690.HK) & Midea (300.HK); In Consumer-Staple space: CR Beer (291.HK), Eastroc (605499.SS) & G ...

Core Insights - The article discusses the expansion of Asian food chains in the United States, focusing on Jollibee, Luckin Coffee, Kura Sushi, and Haidi Lao Hot Pot, and their potential as investment opportunities [1][22]. Jollibee - Jollibee is a Philippine-based fast food chain known for its fried chicken and unique spaghetti, with over 1,300 locations in the Philippines and nearly 500 internationally, including over 100 in North America [1][19]. - The company aims to expand its North American presence from about 100 to 250 locations through franchising, with average unit volumes of $4.2 million per year for company-owned locations [1][19]. - Jollibee's brand is as popular in the Philippines as McDonald's and Coca-Cola, and 60% of its U.S. customers are non-Filipinos, indicating a growing appeal beyond its traditional customer base [1][19]. - The company currently spends less than 2.5% of its total costs on marketing in the U.S., which may hinder brand recognition and average unit volumes as it expands [4][19]. - The management's focus appears to be on acquiring smaller beverage chains rather than solely promoting the Jollibee brand, raising concerns about the company's strategic focus [4][19]. Luckin Coffee - Luckin Coffee, a Chinese coffee chain, has made a significant comeback after a fraud scandal, now boasting over 26,000 locations globally and a revenue growth of 47% last quarter [7][10]. - The company operates on a low-cost, quick-service model, appealing to consumers seeking speed and efficiency rather than a premium experience [9][10]. - Despite its past issues, Luckin Coffee's current growth strategy and profitability metrics are seen as promising, with a lower price-to-sales multiple compared to Starbucks [7][10]. - The company has been expanding aggressively, opening around 2,000 new locations quarterly, and has seen double-digit growth in same-store sales [7][10]. Kura Sushi - Kura Sushi is a conveyor belt sushi restaurant expanding in the U.S. through company-owned locations rather than franchising, which may provide more lucrative returns for investors [11][12]. - The chain has about 75-80 U.S. locations, reporting restaurant-level operating margins of 17-18% and average unit volumes of $4.2 million [12][13]. - Despite its fun dining experience, Kura Sushi is not yet profitable due to high expenses associated with aggressive unit growth [13][16]. - The concept may face challenges in becoming a regular dining choice for consumers, as it is perceived more as a special occasion experience [13][16]. Haidi Lao Hot Pot - Haidi Lao Hot Pot is a high-end hot pot chain with over 1,400 locations globally and more than a dozen in the U.S., known for its unique dining experience [17][19]. - The company operates with low margins, reporting only 3% operating margins in the first half of the year, highlighting the importance of disciplined growth and operational efficiency [17][19]. - The niche market appeal of hot pot dining may limit its mass market success, requiring careful market selection for expansion [17][19].

Summary of Haidilao International Holding Ltd Conference Call Company Overview - **Company**: Haidilao International Holding Ltd (6862.HK) - **Industry**: Consumer (China/Hong Kong) - **Market Cap**: Rmb68,977 million - **Current Stock Price**: HK$13.92 - **Price Target**: HK$17.50 Key Financial Metrics - **1H25 Revenue**: Expected to decline by 3.5% year-over-year (yoy) to Rmb20.7 billion - **1H25 Net Profit**: Expected to decline by approximately 5% yoy to Rmb1.9 billion - **2025 Revenue Forecast**: Cut by 6-7% to Rmb43.1 billion - **2025 Net Profit Forecast**: Cut by 14% to Rmb4.6 billion - **Gross Margin**: Expected to decline to 60.4-60.6% for 2025-2027, down by 2 percentage points from previous estimates Core Insights - **Traffic-Driven Pressure**: The decline in revenue is primarily due to weak traffic and table turnover, exacerbated by competition from food delivery platforms [3][9] - **Self-Help Initiatives**: The company is investing in service enhancements and product offerings to attract customers, which is leading to increased overhead costs and margin pressure in the short term [4][21] - **Positive Outlook for 2H25**: Anticipated recovery in table turnover and revenue growth due to a lower base and self-help initiatives, with expectations of less competition from delivery platforms in the fourth quarter [5][12][31] Financial Performance - **1H25 Financials**: - Revenue: Rmb20.7 billion, down 3.5% yoy - Net Profit: Rmb1.9 billion, down 5% yoy - Gross Profit Margin: 60.0%, down from 61.0% in 1H24 [15] - **Cost Structure**: Increased staff costs and overheads are impacting gross profit margins, with staff costs expected to remain high in 2025 [22][25] Market Dynamics - **Competitive Landscape**: The company faces intense competition from delivery platforms, which is affecting dine-in demand, particularly in the mid-price segment [12][31] - **Long-Term Growth Prospects**: Despite short-term challenges, the company is expected to benefit from macroeconomic recovery and its expansion strategy into different restaurant formats [32][33] Valuation and Investment Thesis - **Valuation**: The stock is currently trading at a P/E of 15x based on revised 2025 EPS estimates, which is considered attractive given the company's resilient cash flow and management capabilities [14][26] - **Investment Rating**: Overweight, with a target price of HK$17.50, reflecting a potential upside of 26% from the current price [7][26] Risks and Considerations - **Downside Risks**: Prolonged weak consumption and potential store closures could negatively impact performance, with EPS potentially 20% lower than base case forecasts in a bear scenario [37][43] - **Upside Potential**: Faster recovery in dine-in activities and new store openings could lead to better-than-expected demand recovery [30][43] Conclusion Haidilao International Holding Ltd is navigating a challenging macro environment with a focus on enhancing service and product offerings. While short-term pressures are evident, the company is positioned for a potential recovery in the latter half of 2025, supported by its unique business model and management strategies.

Investment Rating - The report maintains a Neutral rating for Haidilao International Holding with a 12-month price target of HK$15.30, implying an upside potential of 8.4% from the current price of HK$14.12 [1][2][26]. Core Insights - The earnings forecasts for Haidilao have been revised down by 13%-16% for 2025-27, primarily due to lower-than-expected performance in 1H25, slower store expansion, and the company's strategy to offer better value to customers [2][23][27]. - The company is expected to experience a revenue decline of 4% year-on-year in 1H25, driven by weaker table turn performance and a decrease in party size, although a slight improvement in average selling price (ASP) may provide some offset [20][21]. - Despite the challenges in 1H25, the second half is anticipated to show a recovery in same-store sales growth (SSSG) due to an easier comparison base, which could lead to slight positive growth in average sales per store [2][22]. Summary by Sections Earnings Forecasts - The report projects a revenue of Rmb20.6 billion for 1H25, reflecting a 4% decline year-on-year, with restaurant revenue expected to drop by 6% [20][21]. - For 2025, total revenue is estimated at Rmb43.09 billion, down from the previous estimate of Rmb44.62 billion, marking a 3.4% reduction [25]. Margin Analysis - The gross profit margin (GPM) is expected to contract to 60.7% in 1H25, down from 61.0% in 1H24, due to increased food cost ratios and operating deleverage [1][21]. - Operating profit margin (OPM) is projected to decrease by 0.8 percentage points year-on-year to 11.8% [21]. Store Expansion and Performance - The company is expected to close 8 net stores in 1H25, indicating a cautious approach to expansion amid fluid consumption trends [20]. - The total store count for Haidilao is projected to decrease by 30 stores in 2025, with a total of 1,415 stores expected [25]. Valuation Metrics - The report provides a valuation of 16X for the 2025 estimated price-to-earnings (P/E) ratio, with a projected dividend yield of 6% [2][13]. - The adjusted EBITDA for 2025 is forecasted at Rmb8,063.4 million, reflecting a decline from previous estimates [25]. Key Focus Areas for Investors - Investors are advised to monitor the trends in table turn performance, store expansion plans, margin outlook, and the impact of delivery subsidies on overall performance [22][23].