Haidilao reported 1H25 revenue of Rmb20.7bn (-4% YoY), and net profit of Rmb1.75bn (-14% YoY), lower than our expectation, mainly due to lower-than-expected table turnover. We lower our EPS forecast for 2025 from Rmb0.98 to Rmb0.8, and for 2026 from Rmb1.06 to Rmb0.89, and for 2027 from Rmb1.13 to Rmb0.93. We lower target price from HK$20 to HK$18 based on DCF model, and with 21% upside potential, we maintain a Buy rating.
　　Operational performance of Haidilao brand. In 1H25, the company opened 25
　　new self-operated Haidilao restaurants and 3 franchised restaurants, while closing 33. The total number of stores reached 1,363, including 1,299 self-operated stores in mainland China market, 23 self-operated stores in China’s Hong Kong, Macau and Taiwan regions, and 41 franchised stores. The table turnover rate decreased by 0.4x YoY to 3.8x. The average selling price increased by Rmb0.5 YoY to Rmb97.9.
　　New brands to provide new growth drivers. Haidilao's Pomegranate Plan has
　　incubated 14 catering brands with a total of 126 stores. Among them, “YEAH QING BBQ” opened 46 new stores in 1H25, bringing the total number of its stores to 70.
　　Revenue from other restaurants increased by 227% YoY to Rmb597, and its revenue share rose by c.2ppts to c.3%. Interim dividend. Haidilao announced an interim dividend of Rmb0.309 or HK$ 0.338 per share. The dividend payout ratio for 1H25 was 97%. Based on the closing price of HK$14.88 on August 25, the annualized dividend yield was c.4.5%. Maintain Buy. We like the company's new brands potential, higher management efficiency and high shareholder returns. We maintain our Buy rating.
Risks: Table turnover rate may fall short of expectations. Rising personnel costs could lead to decline in profit margin.