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CMSI Raises HAIDILAO (06862.HK) TP to HKD16; Rating Neutral
Recommend 4 Positive 2 Negative 3 |
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China Merchants Securities (HK) (CMSI) issued a report stating that its post-Labour Day channel checks indicate HAIDILAO (06862.HK) achieved a strong rebound on a same-store basis, with average table turnover rate recording a mid-teens improvement. This was mainly driven by a high-teens increase in customer traffic, offsetting a low single-digit decline in average spending per customer due to promotional discounts. Compared with the weak performance in 1Q (the broker expects revenue to decline by a low single-digit YoY), holiday data showed clear QoQ improvement and continued the high single-digit revenue recovery trend seen in April. Looking ahead, CMSI expects the momentum to extend into the traditional summer peak season and drive 1H revenue growth to the low-to-mid single-digit YoY range. However, this growth trajectory still falls short of more optimistic market expectations, which generally forecast double-digit full-year growth. On margins, CMSI noted that HAIDILAO is actively addressing near-term cost pressures, particularly rising raw material costs such as beef, which are squeezing gross margin. In addition, operating margin expansion may be dragged by restructuring costs and a higher contribution from the delivery business. Following the founders return, the company is undergoing a transformation phase and has launched a series of strategic initiatives, including a "one store, one strategy" outlet revamp plan, sub-brand optimization (such as the currently loss-making "Yanqing BBQ"), and franchise expansion into lower-tier markets. These structural adjustments, coupled with the rapid expansion of the low-margin delivery business (which doubled in scale in 2025 but carries a store-level margin of only 3% to 4%), may dilute overall profitability in the short term. Taking both revenue and margin trends into account, CMSI believes the companys near-term recovery remains constrained by transformation-related pains. CMSI raised its revenue growth forecasts for 2026/27 by an average of about 2.5% to reflect the improvement in offline traffic since the beginning of the year. It lowered its EBITDA forecasts by an average of about 9% to factor in potential cost pressures from input cost inflation and restructuring expenses. Net profit forecasts for this year and next were cut by an average of 7%. Despite HAIDILAO offering an attractive dividend yield of over 5%, providing some downside cushion, CMSI maintained its Neutral rating. The TP was slightly raised from HKD15.3 to HKD16. (da/u) Auto-translated by AI This article was automatically translated by AI, the original language version should be considered the authoritative version. AASTOCKS.com Limited does not guarantee its accuracy or completeness and accepts no liability for any damages or losses arising from the use of this translation. More Details
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