UOB Kay Hian
Date of Report: 27 August 2025
Haidilao International Holding: Robust Expansion Amid Profit Headwinds – Is The Dividend Story Set to Continue?

Executive Summary: Haidilao’s Mixed 1H25 Performance Signals Strategic Expansion and Strong Dividend Commitment

Haidilao International Holding, a leading operator of hotpot restaurants across China, Hong Kong, Macau, and Taiwan, posted a resilient yet challenging set of results for the first half of 2025. While revenues remained steady and aligned with expectations, higher costs and weaker consumer demand weighed on net profits. Despite these headwinds, Haidilao is accelerating its multi-brand expansion and maintaining its generous dividend payout policy, positioning itself as a compelling play for income-focused investors seeking exposure to China’s dynamic food service sector.

Company Overview and Shareholder Snapshot

Haidilao’s portfolio includes its flagship hotpot chain as well as brands such as HAILAO HUOGUO, Brother Miao Dry Pot, Five Grains Three Meals, YEAH QING BBQ, and Madam Zhu’s Kitchen, spanning fast food, barbecue, and Chinese cuisine. The company commands a market cap of HK\$80.7 billion (US\$10.3 billion), with NP United and ZY NP Ltd. as major shareholders.

• GICS Sector: Consumer Discretionary
• Shares Issued: 5,574.0 million
• Bloomberg Ticker: 6862 HK
• 52-week Price Range: HK\$19.96 / HK\$11.60
• FY25 NAV/Share: RMB 1.88
• FY25 Net Cash/Share: RMB 1.04
• Dividend Yield (2025F): 5.4%

Financial Highlights: Revenue Steady, Profit Misses Expectations

Haidilao’s 1H25 results reflect a challenging operating environment, with revenue in line but profitability under pressure from rising costs and slower-than-anticipated recovery in dining demand.

Operational Metrics: Table Turnover, Store Count, and Brand Performance

• Average table turnover rate for self-operated restaurants dropped to 3.8x/day, compared to 4.2x/day in 1H24.
• Overall same-store sales declined by 10%.
• Average spending per guest remained stable at RMB 97.90.
• Haidilao opened 28 new restaurants (25 self-operated, 3 franchised), but closed 33, for a net decrease to 1,363 outlets.
• Renovated 30 late-night themed stores and 50 fresh-cut themed stores, boosting turnover rates by 10–20% in those locations.

Pomegranate Plan: Multi-Brand Acceleration and Revenue Diversification

Haidilao’s strategic Pomegranate Plan is driving aggressive multi-brand expansion. Revenue from non-Haidilao restaurants surged 227% YoY to RMB 597m, now accounting for 3% of total revenue. The company operates 14 other catering brands across 126 restaurants, with YEAH QING BBQ leading the charge:

• YEAH QING BBQ: 46 new restaurants (total 70), generating RMB 200m in 1H25 revenue, with average monthly sales per store of RMB 400,000 and high single-digit profitability.
• Other brands (e.g., SHUA Bakery, Madam Zhu’s Kitchen) showing positive momentum.
• Acquisition-led expansion includes the launch of Jugaogao hotpot in August 2025, targeting value-conscious diners.
• Plan to open >40 new restaurants in 2H25, maintaining mid-single-digit annual growth.

Dividend Policy: Generous Payout Ratio Maintained

Haidilao declared an interim dividend of HK\$0.338 per share, maintaining a 95% payout ratio, consistent with the previous year. Management signaled continued high dividends thanks to healthy cash flow and limited capital expenditure required for the expansion plan.

• Dividend Yield (2025F): 5.4%
• Dividend Payout Ratio: 95%
• Net cash per share: RMB 1.04

Earnings Revision and Risks

• 2025/26 earnings forecasts cut by 13%/11% respectively due to weaker dining demand recovery and higher raw material costs.
• Revenue forecasts trimmed by 4% for 2025/26.
• Gross margin estimates reduced by 0.8ppt, reflecting higher raw material consumption to enhance customer experience.
• Opex estimates raised by 0.8ppt (2025) and 0.6ppt (2026) to account for higher 1H25 expenses.
• Key risks: Lower-than-expected table turnover rate growth and elevated expenses.

Valuation and Recommendation

• Buy rating maintained; target price cut by 11% to HK\$17.00.
• Target price implies 20.9x 2025F PE and 18.5x 2026F PE.
• Current valuation: 17.5x 2025F PE and 15.4x 2026F PE.

Key Financials and Forecasts

Cash Flow and Balance Sheet Strength

• Operating cash flow for 2025F: RMB 6,436m
• Ending cash and equivalents for 2025F: RMB 9,942m
• Net cash position and low leverage ratios support continued dividend payments and expansion.

Outlook: Strategic Expansion and Shareholder Returns Remain in Focus

Looking ahead, Haidilao is set to continue expanding its restaurant footprint, particularly through its multi-brand strategy. Management remains committed to balancing investments and high dividend payouts, underpinned by strong cash flow and prudent capex. While margin pressures and soft consumer demand persist, Haidilao’s operational discipline and portfolio diversification position it well for medium-term recovery and upside.

Conclusion: Haidilao – Steady Growth, Attractive Yield, and Expansion Momentum

Despite the near-term headwinds, Haidilao stands out for its robust expansion, resilient revenue, and shareholder-friendly dividend policy. Investors seeking exposure to China’s food service sector may find Haidilao a compelling option for both growth and yield, as the company accelerates its multi-brand strategy and maintains disciplined capital management.
Broker Coverage: UOB Kay Hian
Date: 27 August 2025