1H24's revenue growth rate was in line with expectations, and the announcement of an interim dividend to increase shareholder returns of 21.491 billion/yoy +13.8% for Haidilao, and the revenue side was in line with our forward-looking expectations (20.8-21.7 billion); it recorded a net profit of 2.038 billion to mother and 9.5% of net profit to mother of 9.5% /year over year -2.5 pct, mainly due to changes in exchange gains and losses and the cancellation of preferential VAT relief policies. Core operating profit of 2.799 billion/ +13.0% year over year (excluding non-financial items such as interest, income tax, exchange gains and losses, fair value gains and losses).
1H24 plans to pay dividends of $1.939 billion (HK$0.391 per share, vs 1H23 unpaid), with a dividend payout ratio of 95%, which is a further increase from 90% for the full year of 2023. The company has carefully expanded to maintain a relatively healthy operation. The 1H turnaround has improved significantly, and is actively experimenting with new scenarios and multiple brands. It is expected that it will continue to improve its business resilience.
We expect EPS to be 0.81/0.85/0.93 in 24-26, and the target price is HK$17.80 based on 20x 24-year PE (compared to the average 19x PE expected by the company Wind and Bloomberg in 24, the company's operations are relatively resilient, the showroom model is more diverse, and a premium is given). Maintain “buy-in.”
The upturn has driven the beautiful growth of the same store, and the new store's performance is better; 2H opening will speed up 1H24 Haidilao restaurant/takeout revenue to 20.414/0.581 billion yuan, yoy+13.8/ +23.3%, respectively. Fast food for one person will drive the increase in takeout revenue. 1H24 Haidilao's same-store sales were +15.3% year-on-year, mainly benefiting from continued recovery. 1H24 same-store turnover rate was 4.2 times per day (vs. 1H23 3.4 times/day). The overall average customer unit price of 97.4 yuan/yoy -5% continued to decline. Newly opened restaurants/other restaurants turned 4.6/4.2 times per day (vs. 1H23 2.9/3.3 times/day), respectively. The new store's performance was clearly superior to the previous one. As of 1H24, the number of stores reached 1,343, and 43 new stores were opened/closed on 11/11. Some stores did not meet expectations or had insufficient potential, and 32 were closed. The company maintains the principle of prudent expansion, focusing on single-store performance. Management guidance will be to use franchises to enter the sinking market in the future, and the number of 2H stores opened is expected to increase significantly from month to month.
The performance on the cost and cost side was relatively stable. Multiple measures were taken to refine operations, opening up a new growth curve, reducing procurement costs and increasing gross profit margin, 1H24 gross profit margin 61.0% /yoy+1.7pct; depreciation/depreciation/depreciation amortization/utility expenses were 33.3/2.7/4.5/3.4% respectively, compared to +2.7/-0.3/-1.5/+0.2pct, mainly due to factors such as increased compensation and benefits and additional employees in some positions. The company has taken many measures to improve internal skills: clarifying headquarters, regional and store functions around the “three tables” (operating table, management table, basic table) to improve operating efficiency; implementing a multi-store model to effectively reduce costs; launching the “Red Pomegranate Plan” to implement multiple brands/business development. CEO Gou Yiqun leads the Innovation and Entrepreneurship Committee, and an executive team forms the Five Tigers to actively empower new brands. 1H24 has 5 entrepreneurial projects in operation.
Target price HK$17.80, maintaining “buy”
Considering that 1H is still closing the store properly, the 24-26 store opening assumption is slightly lowered. The 24-26E EPS is expected to be 0.81/0.85/0.93 yuan (24-25 years ago value: 0.93/1.03/1.16 yuan). Referring to the 24-year comparison company Wind and Bloomberg, the average value of 19x PE was expected. The company's operations were relatively resilient and the showroom model was more diverse, and the target price for 20x 24-year PE was 17.80 HKD. “Buy” rating.
Risk warning: consumer demand for hot pot is weaker than expected; the company is expanding faster than expected; industry competition intensifies