下行风险可控，更多改革启动

Haidilao (6862 HK) Downside protectedandmore reforms start Target PriceHK$17.46(Previous TPHK$20.20)Up/Downside24.4%Current PriceHK$14.04 1H25results wereweak but the negativesshould have already priced in.Weexpect SSS to likely stabilizein 2H25E, with the support of different companyspecific initiatives. We alsobelievethat a potential turnaround could happen,especiallywhen the store expansion and new brands development start toaccelerate. We arecautiously optimistic about the outlook in 2H25E.Even thoughthe macro environment may still be under pressure and industry competitionmay stay intense, we can still see a few positives and company specificinitiativesahead,namely:1) potentially more policy support from thegovernment to further boost consumption, 2) SSS (so as the table turnoverand recovery rate) decline have stabilized in 2Q25 and started to improvein Jul 2025 (we are forecasting just-1% to flattish SSSG in 2H25E), 3)various store revamps (into different themed stores), 30 storeswere alreadytransformed to cater for the late night dining, where many late night snackswill be sold, the same store sales could be boosted by 10% to 20%accordingly, other themes like kids & families friendly and pet friendly willalso be introduced, these will all be helpfulforboosting the SSSG, 4)different upgrade around the products, forexample, more fresh slaughtermeat or fresh seafood are being offered in about 50 stores already and morelocalized dishes (around60 to 80 per month on a national-wide basis) willbeoffered as well,and 5)speeding up of the delivery businessdevelopment,andthe Company has installed more advance equipment inthe restaurant to accelerate the productiontoensure the food quality ofdelivery products, and it has started to sell more Maocai (a spicy stew basedon the hotpot ingredients and soup base) with ricewhich isveryhot-selling. China Consumer DiscretionaryWalter WOO(852) 3761 8776walterwoo@cmbi.com.hk Store expansion may still accelerate, in our view, esp. when the growthof new brands isbeing facilitated.The number of self-operated hotpotrestaurants has dropped HoH in 1H25, perhaps due to the lower-than-expected table turnover. However, aidedbydifferent measures mentionedabove, we believe the table turnover should likely improve in 2H25E and thenumber of closures will be stabilized. And on the other hand, the number offranchised hotpot restaurants should speed up with ease, thanks to lessresources required (and the Company will also use the mentorship strategywhenopening a new franchised stores, where a new store will usually beclose to an old store and the training can be done closely). Hence,we dothink the management’s guidance of MSD % of store count increase inFY25E is still achievable.Moreover, Haidilaohas also lowered the thresholdof building a new brand. Forinstance, all stores ranked D or above arequalified for new brands development.Also, the founders of that new brandwill be given a greater level of freedom to form their team and strategy.Moreover, the “Red Pomegranate” programme is now opened for externaltalents or brands for more co-developments. Source: FactSet Recent reports:Green Tea Group (6831 HK)-SolidSSSG and margin trend will likely sustain(27Aug25) Jiumaojiu (9922 HK)-Multiple positivesignssuggest a turnaround(26Aug25) Yum China (9987 HK)-Target kept butcash return may be limited(6 Aug25) Green Tea Group(6831 HK)-1H25Eprofit comes as surprise with positive2H25E outlook(4 Aug25) Luckin Coffee (LKNCY US)-Sales arebooming but costs are also rising(31 Jul25) Maintain BUY but trim TP to HK$ 17.46, based on 17x FY26E P/E (rolled overfrom 18x FY25E P/E).We cut our FY25E/ 26E/ 27E net profit forecasts by 18%/19%/ 19%, in order to factor in: 1)weaker-than-expected SSSG, 2)slower-than-expected store expansion and 3)lower-than-expected GP margin.However, whilethe macro is still under pressure, we are cautiously optimistic on a stabilization ofSSSG in 2H25E and ahead, aswell as on its store expansion and new brandsdevelopment.Nonetheless, with its generous dividend payout policy of close to100%, FY25E/ 26E yield could be as high as 6%/ 7%.Therefore, webelieveitsdownside is more protected.The stock is now trading at 15x FY25E P/E or 14xFY26E P/E, still far below its5-yearaverage of 27x and peer’s average of 22x FY25EP/E or 17x FY26E P/E. 1H25 resultsdeterioratedbut largely expected.In 1H25, Haidilao’s sales droppedby 4% YoY to RMB 20.7bn, slightly below BBG est. of 2% sales growth in FY25E.Duringthe same period, net profit fell by 14% YoY to RMB 1.76bn, also weakerthanBBG est. of the 5% net profit drop in FY25E.Such a poor result was mainly due to:1) weaker-than-expected SSSG, 2) lower-than-expected GP margin and 3) greater-than-expected operating deleverage(even though D&A expenses droppedsignificantly).In fact, the share price has been weakfor a few months already, whichis within market and our expectation.The bright spot is that the dividend payout ratiois still very hig