To The Moon

Overview of Overall Markets: The Chinese stock market has seen mixed performances recently, with investor sentiment influenced by economic data, policy changes, and the global economic environment. The restaurant and hospitality sectors have been particularly volatile, reflecting both the challenges of a post-pandemic recovery and the pressures from economic headwinds, such as changes in tax policies and currency fluctuations.

Haidilao's $HAIDILAO(06862)$   Financial Performance: Resilient Revenue Growth Haidilao reported a 9.74% decline in net profit for the first half of 2024, reaching RMB 2.038 billion. The decline is mainly attributed to changes in net foreign exchange gains and the cancellation of VAT offset policies in mainland China. However, the company achieved record revenues of RMB 21.491 billion, a 13.8% year-on-year increase. Core operating profit also rose by 13.02% to RMB 2.799 billion, showcasing strong operational performance despite external challenges.

Restaurant Expansion and Customer Engagement: Strategic Moves Haidilao continues to expand its restaurant network, operating 1,343 restaurants as of June 30, 2024, with the majority located in mainland China. The company has strategically opened 11 new restaurants while closing 43 underperforming or commercially untenable locations in the first half of 2024. This focus on optimizing restaurant operations aligns with their aim to maintain high service standards and profitability across new locations.

Operational Efficiency: Balancing Growth and Quality Haidilao’s operational efficiency is evident in its average daily table turnover rate of 4.2 times and its ability to serve over 210 million customers in the first half of 2024. The company plans to further enhance its regional presence and improve restaurant management capabilities in the second half of 2024, with a significant increase in new restaurant openings expected.

Outlook and Insights: Haidilao's commitment to strategic growth, regional expansion, and operational optimization suggests a positive outlook for the second half of 2024. However, investors should consider the potential impact of ongoing economic uncertainties, changes in consumer spending, and the company’s ability to manage currency risks and regulatory shifts. The company's ability to maintain profitability while expanding will be crucial in determining its future stock performance.

Conclusion: Haidilao has demonstrated resilience in the face of economic challenges, with strong revenue growth and strategic restaurant management. While the decline in net profit highlights certain risks, the company’s focus on expansion and efficiency positions it well for future growth. Investors may find Haidilao an attractive opportunity, especially if the company can sustain its operational momentum and navigate external risks effectively.