Tehai International released its 2024 semi-annual report. 1H24's revenue was 0.371 billion US dollars, up 14.5% year on year; net loss to mother was 4.58 million US dollars (1H23 net profit of 3.54 million US dollars), mainly due to exchange losses of about 0.02 billion US dollars. After exclusion, the estimated net interest rate was about 4%. The operating margin at the 1H24 restaurant level was 8.7%, an increase of 0.4 pct over the previous year. The overall restaurant turnover rate and same-store turnover rate reached 3.8 times per day, an increase of 0.5 times per day over the previous year. The increase was significant, mainly due to: ① the continuous recovery of the economic environment; ② the efforts made by stores around the world to improve customer satisfaction, expand the customer base, and capture richer consumption scenarios.

Contributions from regions outside of Southeast Asia have increased, and new businesses have provided new opportunities. In terms of revenue structure, ① restaurant operating revenue was 0.356 billion US dollars, up 14.0% year on year, of which Southeast Asia accounted for 54.9%, a decrease of 2.7 pct. East Asia, North America, and others (Australia, United Kingdom, UAE) accounted for 12.1%, 20.7%, and 12.3%, respectively, increasing 0.6 pct, 0.9 pct, and 1.2 pct respectively. ② Takeout business revenue of $0.0052 billion, up 20.9% year over year. ③ Other revenue was $0.0092 billion, up 33.3% year over year.

The expansion of the restaurant network has accelerated, and the turnover rate has increased significantly. ① Restaurant size: At the end of 1H24, the total number of restaurants was 122, a net increase of 7 over the same period last year, 8 new stores were opened, and 1 store in Southeast Asia was closed. By region, Southeast Asia, East Asia, North America, and other regions each had 74, 18, 20, and 10 companies, with an increase of 5, 1, 2, and 0 each. ② Restaurant performance: 1H24 received a cumulative total of 0.015 billion customers, up 17.9% year on year; the overall customer unit price was 24.6 US dollars, down 3.5% year on year; the overall average turnover rate was 3.8 times per day, up 0.5 times per day from 1H23, up 0.5 times per day from 1H23, and the restaurant's reception capacity improved. ③ Same-store operation: Average daily sales of the same store in Southeast Asia, East Asia, North America, and other regions were 1.6, 0.016, 0.022, and 0.027 million dollars, respectively, up 2.0%, 22.5%, 14.2%, and 12.3% year-on-year; same-store turnover rates were 3.7, 4.2, 4.1, and 4.1 times per day, respectively, with year-on-year increases of 0.4, 0.9, and 0.4 times per day, respectively.

Restaurant level profits continue to grow, and costs and expenses are optimized. (1) Raw materials and consumables: increased by 14.0% to 0.125 billion US dollars, accounting for 33.6% of revenue, a year-on-year decrease of 0.2 pct. (2) Employee costs: An increase of 17.3% to 0.13 billion US dollars, accounting for 34.1% of revenue, an increase of 0.8 pct over the previous year, mainly due to the increase in the number of employees due to strategies such as the expansion of the restaurant network and the increase in customer traffic and turnover rates, as well as the increase in the legal minimum wage in the countries where individual operations are located. (3) Depreciation and amortization: A decrease of 6.7% to 0.039 billion US dollars, accounting for 10.5% of revenue, a year-on-year decrease of 2.4 pct, mainly due to reduced depreciation and increased revenue. (4) Property rent and related expenses (short-term rental portion): increased by 44.4% to USD 0.009 billion, mainly due to increased property management fees due to the opening of new restaurants and an increase in variable lease payments as revenue from related restaurants increased. (5) Hydropower expenditure: increased by 8.73% to 0.013 billion US dollars, accounting for 3.7% of revenue, and remained relatively stable. (6) Travel and related expenses: An increase of 39.1 to 0.003 billion US dollars, accounting for 0.9% of revenue, an increase of 0.2 pct over the previous year, mainly due to an increase in business travel with business expansion. (7) Other expenses: An increase of 19.1% to 0.033 billion US dollars, an increase of 0.4 pct over the previous year, mainly due to the expansion of the restaurant network and the increase in the turnover rate, the outsourced service fee increased by 0.005 billion US dollars. (8) Other losses: increased by 81.0% to 0.018 billion US dollars, accounting for 3.1% of revenue, mainly foreign exchange losses. (9) Financial costs: Decreased by 9.3% to 0.004 billion US dollars and remained relatively stable.

Improve management levels and enhance customer connections. 1H24, restaurant management capabilities and operating efficiency in all regions of the company have improved markedly, mainly due to: ① the continuous recovery of the economic environment; ② the efforts made by stores around the world to improve customer satisfaction, expand customer groups, and capture richer consumption scenarios. For example, carry out activities in conjunction with events such as holidays, concerts, tourist seasons, sporting events, etc.; and expand the surrounding customer base and thoroughly manage family dinner scenes, supper scenes, etc.; ③ Product innovation and optimization, close to the needs and preferences of local consumers, and designate national managers from various countries as the first person responsible for product work in local markets. 1H24 has been optimized and updated more than 500 times in each country, covering categories such as pot base, dishes, snacks and beverages; ④ Continuously optimize the global supply chain, actively seek high-quality local suppliers, and continue to strengthen cost control and improvement while ensuring the quality of meals Operational efficiency. ⑤ Exploring innovation and management in different business formats, the “Red Pomegranate Project” has formed a team of highly skilled management talents with an innovative spirit, covering all aspects of store operation, product research and development, and brand marketing. Encourage managers with excellent performance to not only manage the original store or business, but also participate in the entrepreneurship and management of new business formats through a “double management” and “multi-management” approach, so as to stimulate more potential of outstanding talents and enhance internal management efficiency.

Update profit forecasts and valuations. We are optimistic about the company's brand advantages, management philosophy and international operation capabilities. In the short term, we expect to continue to optimize restaurant operating efficiency under a low base salary and high dividend remuneration structure, stick to localization+innovation-driven growth for a long time, and have broad scope for chain development. Revenue for 2024-26 is expected to be 0.8 billion US dollars, 0.92 billion US dollars, and 1.04 billion US dollars, respectively, up 17%, 15%, and 14% year over year, respectively, and net profit to mother is 0.016 billion US dollars, 0.053 billion US dollars, and 0.068 billion US dollars, respectively, a decrease of 36%, an increase of 224%, and an increase of 29% year-on-year, respectively. Corresponding EPS is $0.03, 0.08, and $0.10 per share, respectively. Based on 1.2-1.4 times PS in 2025, the calculated reasonable value range is 1.70-1.98 USD/share, corresponding to HK$13.23-15.43 per share (converted from USD 1 = HK$7.8026); maintaining a “superior to market” rating.

Risk warning: Store expansion falls short of expectations, increased market competition, food safety risks.