Haidilao released its 2024 semi-annual report. 1H24's revenue was 21.49 billion yuan, up 13.8% year on year; net profit to mother was 2.04 billion yuan, down 9.7% year on year. Specifically, net profit was 2.03 billion yuan, down 10.0% year on year, mainly affected by changes in net exchange profit and loss and cancellation of preferential VAT deduction policies in mainland China; core operating profit was 2.8 billion yuan, up 13.0% year on year. The company expects to pay 1.94 billion dollars (95% dividend ratio), corresponding to a dividend ratio of about 3.1%.
Looking at the revenue split: 1H24, total revenue was 21.49 billion yuan, up 13.8% year over year. In terms of revenue structure:
① Haidilao Restaurant's operating revenue was 20.41 billion yuan, up 13.8% year-on-year. Among them, the revenue of first-tier, second-tier, third-tier cities/ Hong Kong, Macao and Taiwan regions was 35.9/8/8.16/0.7 billion yuan, respectively, up 9.6%/11.7%/18.9%/6.0% year-on-year, accounting for 17.6%/39.1%/39.9%/3.4%, respectively, -0.6pct/-0.8pct/+1.7pct/-0.3pct, respectively. ② Revenue from other restaurants increased 74.3% to 0.18 billion yuan, takeout business revenue increased 23.3% year over year to 0.58 billion yuan, and condiment and food sales revenue decreased 19.2% year over year to 0.3 billion yuan.
Store expansion is expected to accelerate, promote brand incubation and store quality improvement. (1) Restaurant size. By the end of 1H24, the total number of Haidilao restaurants was 1,343, a net decrease of 31 from 1,374 at the end of 23:11 new stores were opened and 43 were closed. The number of first-tier, second-tier and third-tier cities/Hong Kong, Macao and Taiwan regions was 226/530/564/23 respectively, a net decrease of 6, 8, 17 or 0, respectively, from the end of 23. The company expects a significant increase in the number of stores opened in the future compared to 1H24, and will introduce a franchise model and implement the “Red Pomegranate Plan” (incubate and develop more new catering brands), which is expected to further increase space and broaden categories. (2) Restaurant performance. At 1H24, the customer unit price was 97.4 yuan, down about 5.3% year on year; the average turnover rate was 4.2 times per day, up about 27.3% year on year. Among them, mainland China/Hong Kong, Macau, and Taiwan all had turnover rates of 4.2 times per day, up 27.3%/2.4% year on year, respectively. The turnover rate of newly opened restaurants was 4.6 times per day, a significant increase of 58.6% year on year. (3) Same store operation. In 1H24, the average daily sales volume of the same store in first-tier, second-tier, third-tier cities/Hong Kong, Macao and Taiwan was 8.86/0.0859/0.0821/0.1675 million yuan, respectively, up 10.5%/13.0%/19.2%/1.0% year on year; the average turnover rate of the same store was 4.0/4.3/4.1/4.2 times per day, respectively, up 17.6%/22.9%/28.1%/2.4% year-on-year respectively.
Reduce procurement prices and increase employee incentives. 1H24, (1) Cost of raw materials and consumables: increased 9.1% to 8.39 billion yuan, accounting for 39.0% of revenue, a year-on-year decrease of 1.7 pct, mainly due to lower procurement prices for raw materials and consumables. (2) Employee costs: Increased by 24.0% to 7.16 billion yuan, accounting for 33.3% of revenue, an increase of 2.7 pct over the previous year, mainly due to increasing comprehensive salary and benefits and supplementing personnel in some positions. (3) Depreciation and amortization: Decreased by 11.1% to 1.33 billion yuan, accounting for 6.2% of revenue, a year-on-year decrease of 1.7 pct, mainly due to reduced depreciation and amortization and increased revenue. (4) Rent and related expenses: increased by 5.3% to 0.21 billion yuan, accounting for 1.0% of revenue, a year-on-year decrease of 0.1 pct. (5) Hydropower expenditure: increased by 19.2% to 0.72 billion yuan, accounting for 3.4% of revenue, and remained relatively stable. (6) Travel and communication expenses: increased by 20.5% to 0.09 billion yuan, accounting for 0.4% of revenue, an increase of 0.0pct over the previous year. (7) Financial costs: Reduced by 23.2% to 0.14 billion yuan, accounting for 0.7% of revenue, a year-on-year decrease of 0.3 pct, mainly due to reduced interest on bank loans and lease liabilities. (8) Other income and loss: Other losses of 0.07 billion yuan, including exchange losses of 0.03 billion yuan.
Adhere to “customer satisfaction and employee efforts” to improve restaurant service quality and operational efficiency. ① Work around the “three tables”: Further clarify the functions of headquarters, regions, and stores; each sector carries out its duties; everything revolves around “customer satisfaction” and “employee effort.” ② Implement a multi-store model: On the basis of ensuring the continued healthy operation of the original stores, store managers can apply to manage multiple stores. Employees can not only make talented people work harder and get more, but they can also accumulate work experience in different types of stores, consolidate their job foundation, and exercise management skills. ③ Introducing a franchise model: The rules, standards, assessment mechanisms and procedures of franchise stores are all consistent with direct-run stores, so that customers can enjoy a dining experience that is no different from that of direct-run stores. Through joining, Haidilao expanded its scope of expansion and coverage, and achieved steady growth in the number of stores and entry into a sinking market. ④ Launched the “Red Pomegranate Program”: It aims to encourage the incubation and development of more new catering brands and promote innovation in food service. ⑤ Expand food and beverage consumption patterns that are closer to everyday life and more frequent: Starting in 2023, the company will open a number of camping hot pot, campus hot pot, corporate hot pot, etc. all over the country; in terms of takeout, the one-person food business continues to grow. ⑥ Incubation and innovation around other catering brands: The Group's 1H24 has a total of 5 entrepreneurial projects, such as “Yayoi Yakiniku Restaurant” and “Xiaohi Hot Pot”. The types include yakiniku, hot pot, Chinese fast food, etc., covering more price ranges and consumer groups.
Update profit forecasts and estimates. In the medium term, as management capabilities improve, the company's store expansion will be relatively accelerated, and sufficient cash flow is expected to maintain high dividends, and the performance is highly certain. In the long run, the launch of franchise strategies and brand incubation are expected to further contribute to the increase. Revenue for 2024-26 is estimated to be 45.433 billion yuan, 49.094 billion yuan, and 53.178 billion yuan, respectively, up 9.6%, 8.1%, and 8.3% year-on-year increase, respectively. Net profit to mother is 4.537 billion yuan, 5.078 billion yuan, and 5.523 billion yuan, respectively, up 0.8%, 11.9%, and 8.8% year-on-year respectively. Corresponding EPS is 0.81, 0.91, and 0.99 yuan/share, respectively.
Based on 15-18 times PE and 8-10 times EV/EBITDA in 2024, calculate a reasonable value range of 12.1-15.6 yuan/share, corresponding to HK$13.2-17.0 per share (converted to HK$1 = RMB 0.9141); maintaining the “superior to market” rating.
Risk warning: Passenger flow restoration falls short of expectations, store adjustments fall short of expectations, food safety risks.