Matters:
Haidilao announced its 2024 interim results, with revenue of 21.49 billion yuan (yoy +13.8%), core operating profit of 2.799 billion yuan, a year-on-year increase of 13%, and the group's net profit of 2.033 billion yuan (yoy -10%), mainly due to increased exchange losses and cancellation of preferential VAT policies. Core operating margin 13% (13.1% for 23H1). Maintain a large dividend. The current EPS was $0.38, and the dividend was $0.358 per share.
Commentary:
Continue to streamline stores and maintain the pace of opening fewer and fewer stores. In the first half of 2024, 11 new stores were opened and 43 stores were closed. By the end of the period, the company operated 1,343 Haidilao restaurants (1,374 at the end of last year), 1,320 in mainland China, and 23 in Hong Kong, Macao and Taiwan.
The management consists of three parts: business schedule/operating results, management form/management results, basic table/ management actions to optimize customer satisfaction and implement a multi-store model. Store managers can manage multiple stores, including campus stores and other catering stores, and get more; launch a red pomegranate plan to develop more catering brands. The Innovation and Entrepreneurship Committee led by the company's CEO will continue to integrate resources at the group level to incubate new startup brands. The company had 5 new brands in the first half of the year, covering yakiniku, hot pot, Chinese fast food, etc.
Thanks to brand strength and refined operations, the overall number of same-store turnover increased markedly: the number of same stores (calculated over 150 days of continuous operation) was 1,257, and the number of same-store turnover was 4.2 times (3.4 times in the same period last year). Among them, first-tier cities rose 0.6 times (3.4 → 4.0), second-tier cities rose 0.8 times (3.5 → 4.3), third-tier cities and below rose 0.9 times (3.2→4.1), and Hong Kong, Macao and Taiwan regions rose 0.1 times (4.1→4.2).
Overall turnover recovered, with an average turnover rate of 4.2. The same period last year was 3.3, with 4.6 new stores opened (2.9 in the same period last year), and 4.2 existing stores (3.3 times in the same period last year); by city breakdown, first-tier cities increased 0.6 times (3.4 → 4.0), second-tier cities increased 0.8 times (3.5 → 4.3), and third-tier cities increased 0.9 times (3.2 → 4.1). The Hong Kong, Macao and Taiwan regions increased 0.1 times (4.1→4.2).
Due to changes in the menu structure and increased promotions, customer orders declined. The average customer unit price for 24H1 was 97.4 yuan (yoy -5.3%), the 23H1 unit price was 99.1 yuan. Looking at 24H1 by city, it was 104.1 yuan for first-tier cities (110.3 yuan in the same period last year), 96.8 yuan for second-tier cities (101.8 yuan in the same period last year), 91.4 yuan for third-tier cities (96.1 yuan in the same period last year), and 197.7 yuan for Hong Kong, Macao and Taiwan (205.5 yuan in the same period last year).
Although customer orders are under pressure, thanks to internal management adjustments and operational efficiency improvements, the cost side has been optimized. Among them, food costs/COGs account for -1.7pct to 39%; employee costs account for +2.8pct to 33.3%, mainly due to additional personnel; the rent share is basically unchanged, at 1% (-0.1pct); and the discount ratio is -1.8pct to 6.2%.
Investment suggestions: We emphasize that the company has a comprehensive layout in the catering industry, leading infrastructure, advanced incentive mechanisms, and strong brand power. During the pandemic, operations continued to improve, etc., and continued to improve, but considering the uncertainty of the future consumption environment, we lowered the 2024-2026 EPS forecast to 0.80 yuan, 0.92 yuan, and 1.01 yuan (previous values were 0.98 yuan, 1.11 yuan, 1.19 yuan). The current stock price is 14 times, 12 times and 11 times PE, respectively. PE was given 20 times in 2024, corresponding to a target price of HK$17.32 (current exchange rate), maintaining the “Recommended” rating.
Risk warning: Cryptography is too fast, leading to a downturn that exceeds expectations; food safety risks.