Jinwu Financial News | According to Huaxing Securities Research, Haidilao (06862)'s turnover rate improved to 3.8 times per day, corresponding to an average of 290,000 shoppers, and basically recovered to the level of 19, verifying the effectiveness of a series of management changes implemented earlier, from product iteration and marketing customer acquisition, to salary structure adjustment and store operation. Currently, it is also continuing to explore ways to increase repeat purchases and expand new customers, further quantify the potential customer base around the store, identify more than 130 million potential customers around the store, and combine it with 3 km to the store Differentiation of indicators such as frequency and membership level Promote marketing strategies to further improve turnover.

According to the bank, Haidilao iterates on the “Hi Hi Hi System” to allow managers to track multi-dimensional data such as store turnover and profit in real time, and adjust operation strategies in a timely manner, with regular reminders and accountability from the digital system to continuously improve store operation efficiency, making it possible for Haidilao to respond more flexibly to terminal changes, and future performance is quite predictable. The bank raised 2024/25 revenue by 4.7%/5.4% and introduced the 2026 forecast. Revenue is expected to increase 11.4%/9.3%/7.9% to 461.8/504.6/54.43 billion yuan, respectively; increase net profit to mother by 7.1%/6.4% in 2024/25, and introduce 2026 forecasts. The net profit to mother is expected to increase 15.1%/12.1%/10.7% year on year to 51.8/58.1/6.43 billion yuan, respectively.

The bank added that since March, Haidilao has been open to franchise, signed a 10-year contract with the franchisee, collected millions of membership fees at once, and extracted monthly revenue, without increasing the price of raw materials. Combined with a single store capital expenditure of 8 million yuan, the bank estimates that the payback cycle also reached 4.8 years, longer than Taiji 1.5-2 years and KFC/Pizza Hut 2-3 years. What's more, franchisees still have to pay millions of franchise fees. It is expected that the number of franchisees that will land in the short term may be relatively limited. Unlike Taiji and KFC/Pizza Hut, service quality is one of Haidilao's core competencies, but it is still unknown whether the franchise model can guarantee a continuous high degree of standardization of service quality to maintain customer consumption stickiness and a stable turnover rate, and further verification is needed.

The bank said that Haidilao, as an industry leader with proven performance certainty and an excellent dividend ratio, should enjoy a valuation premium. Combined with 15-20 times P/E, the bank expects a market capitalization of between HK$858-114.3 billion under neutral assumptions, with an average value of HK$100 billion vs. current market value of HK$98.3 billion, which is worth continuing attention. The bank gave Haidilao 20 times the 2024 P/E, corresponding to the new target price of HK$20.51, a 15% reduction from the old target price, and there is still room for 16% increase from the current target price.