The Zhitong Finance App learned that Anxin International released a research report stating that maintaining the “buy” rating of Haidilao (06862), the net profit for 24/25/26 is 46.3/51.6/5.62 billion yuan, respectively. The corresponding EPS is HK$0.91/1.02/1.11, and the target price is HK$24.2. The bank believes that Haidilao is still one of the most valuable brands in the hot pot industry. Against the backdrop of the overall pressure on the consumer environment, the company responded positively and handed over an impressive questionnaire. Profits will continue to grow steadily as the company restarts expansion.

The report's main points are as follows:

The turnover rate continued to recover significantly in the second half of the year, and the performance far surpassed that of peers.

The overall turnover rate of stores in '23 was 3.8 times per day, a further increase from 3.3 times in the first half of the year, indicating that the company's turnover level in the second half of the year was higher. In the first two months of 24, the turnover rate continued to increase month-on-month, with a year-on-year increase of 30%. The turnover rate was over 5 times during the Spring Festival. The company responds flexibly to hot topics, prepares drainage activities for concerts, performs “Course 3”, and conducts immersive live broadcasts on the Douyin platform, etc., making the brand continue to rise in popularity.

Profit margins have increased markedly.

The company's net interest rate recovered to 10.8% in '23, and its profitability has exceeded that of '19. Specifically, the gross margin reached 59%, which is the highest level in history; labor costs account for 31.5%, which is at an extremely low level in history; and the share of rent and other expenses is also at the lowest level in history, causing the company to ushered in a significant increase in profit margins.

Expansion was restarted, and the number of stores grew at a single-digit rate.

Previously, Haidilao had not opened a large-scale store for two and a half years. This time, management confirmed that it will restart expansion. The store's growth rate is not expected to be in single digits, so they will still be relatively cautious about opening a store. Furthermore, the company has begun to experiment with the franchise model, but the number of franchise stores will not be large in the short term, and the company will continue to explore a franchise model suitable for Haidilao's development. There will also be more exploration in store formats, such as small stores or other types of stores with differentiated experiences.

Dividends have increased dramatically, and interest-bearing debt has been drastically reduced.

Haidilao announced a dividend of HK$0.824 per share, with a dividend ratio of 90%. Furthermore, the company repaid approximately 1.92 billion loans, and the balance ratio fell from 65% in '22 to 53% in '23. The financial situation is more stable.

Risk warning: Competition in the industry has intensified, consumer intentions have fallen short of expectations, and serious food safety issues have occurred.