HAIDILAO(HK:06862)2025-07-19 14:57Summary 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.