CMSI Raises HAIDILAO TP to HKD16; Rating Neutral

China Merchants Securities (HK) (CMSI) issued a report stating that its post-Labour Day channel checks indicate HAIDILAO (06862.HK) +0.050 (+0.331%) Short selling $81.52M; Ratio 111.762% 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)(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2026-05-12 16:25.)