Core views
24H1 achieved revenue of 21.491 billion yuan, +13.8% YoY, and realized net profit to mother 2.038 billion yuan, or -9.7% YoY. Core operating profit was 2.799 billion yuan, +13.0% year over year, and revenue and core operating profit reached record highs compared with the same period. The 24H1 average turnover was 4.2 times, +0.9 times year-on-year. Each customer spent 97.4 yuan, -5.3% year-on-year. The profit margin for core operations was 13.0%, which was basically the same as -0.1 pct year on year. Iterative improvements and model innovation continue, and the “Red Pomegranate Plan” was launched to encourage the incubation and development of more catering brands. It is expected that the company will continue to benefit from strategies and capacity improvements until the new model gradually matures to unleash new growth potential.
occurrences
The company announced its 2024 interim results, achieving revenue of 21.491 billion yuan, +13.8% YoY, and net profit to mother of 2.038 billion yuan, or -9.7% YoY.
Brief review
Core operating profit and turnover increase, overall operation is improving
24H1's core operating profit was 2.799 billion yuan, +13.0% year on year. Revenue and core operating profit reached a record high compared with the same period, and the total number of customers received by all stores exceeded 0.21 billion.
Net profit decreased 10.0% from the same period last year, mainly affected by changes in net exchange gains and loss and cancellation of the value-added tax deduction preferential policy in mainland China; revenue structure, 24H1 takeout revenue accounted for 2.7%, +0.2pct year on year, and other restaurant operating income was 0.182 billion yuan, accounting for 0.8%, +0.3 pct year on year, condiment and food sales accounted for 1.4%, -0.6 pct year on year; by the end of 24H1, the number of Haidilao restaurants was 1,343, down 39 from year on year, and maintained in the first half of the year. Eleven new restaurants were opened on the principle of prudent expansion. At the same time, some restaurants that did not meet expectations and had insufficient growth potential were shut down. Other restaurants ceased operations due to property adjustments and other commercial reasons. A total of 43 stores were closed during 24H1. In 24H2, the company will continue to use a bottom-up store opening method. The number of stores opened is expected to increase significantly compared to 24H1; on the operating efficiency side, 24H1 has an average turnover of 4.2 times, +0.9 times compared to the previous year, a significant increase. The main reason is that the reception capacity of a single store is improved after sufficient manpower and operational preparations.
Each customer spent 97.4 yuan, -5.3% year-on-year. Looking at tier-level cities, first-tier cities -5.6%, second-tier cities -4.9%, third-tier cities -4.9%, and third-tier and below -4.9%. Second-tier cities, on the other hand, had the highest turnover, 4.3 times. The newly opened restaurant overturned 4.6 times. Looking at the same store performance, the average daily sales in first-tier cities were +10.5% year-on-year, +13.0% in second-tier cities, and +19.2% in third-tier cities.
The overall performance on the cost side is stable. The cost of raw materials and consumables accounted for 39.0% of revenue, -1.7 pct year-on-year. Employee costs accounted for 33.3%, +2.8pct compared to the previous year, which raised the salary level and added some jobs. Depreciation and amortization accounted for 6.2%, -1.8pct year over year. Other expenses accounted for 4.1%, +0.5pct year-on-year, mainly due to management system optimization. The net profit margin was 9.5%, -2.5pct year on year, while the core operating profit margin was 13.0%, which was basically the same as -0.1 pct year on year.
Iterative improvement and model innovation continue, leading advantages highlighted
24H1 To improve service efficiency, 1. Management at all levels worked around the “three forms”, business tables, management tables and basic forms to further clarify the functions of headquarters, regions, and stores; 2. Implement a multi-management model; 3. Introduce a franchise model to gradually expand the sinking market; 4. The “Red Pomegranate Plan” encourages the incubation and development of more catering brands, focusing on the five major areas of entrepreneurship mechanism, product innovation, supply chain guarantee, operational collaboration, and marketing support, focusing on overall development and comprehensive application of equity incentives. 24H1 has a total of 5 entrepreneurial projects, such as “Fire Please Yakiniku Restaurant” and “Xiaohi Hot Pot”. The types include yakiniku, hot pot, Chinese fast food, etc. The company plans to pay an interim dividend of HK$0.391 per share, and the dividend ratio is still high. In the current business environment, the company relies on continuous iteration and strategic upgrading of its core capabilities, giving full play to its leading brand advantages, and has achieved high-quality performance in terms of operating efficiency, revenue, and profitability. It is still looking forward to continuous development after the new model is gradually verified.
Investment advice: Net profit due to mother is expected to be 4.526 billion yuan, 4.991 billion yuan, and 5.349 billion yuan from 2024 to 2026. The PE corresponding to current stock prices is 13.8X, 12.6X, and 11.7X, respectively, maintaining an “increase in holdings” rating.
Risk analysis
1. There is still uncertainty about the opening effects of the franchise cooperation model and partner control. If the quality control and management model of partner stores present certain risks, it may have a certain impact on the overall brand effect, and if the effect of this model is average, it may affect long-term store expansion space; 2. Relying on labor cost reduction, the stability of the model needs to be further verified. If in the context of outstanding service attributes, the variance in customer flow in stores narrows in the future, and still requires continuous investment in human resources, it may face instability in labor cost reduction, which affects profitability; 3. High-frequency food and beverage innovation The industry's conventional style of play. The company continues to strengthen innovation to achieve good results, but it still needs to maintain a high frequency and success rate, and this model also has risks. Furthermore, hot pot brands are being added rapidly in the market, or they may continue to face competitive competition; 4. Brand development stage and ongoing risk; 5. Possible uncertain risk of multi-brand development.