Highlights

• Haidilao’s 1H26 operating profit beat, driven by expense savings but net profit missed consensus due to non-operating items. The company raising the dividend payout to 100% was a surprise.
   

• Looking ahead, the Haidilao brand will maintain a steady store opening pace at mid-single-digit growth this year, while new brands, food stall hot pot and sushi, will enter the replication stage. The delivery business is expected to sustain rapid growth at a high double-digit rate in 2H26, but its profitability is lower than that of dine-in. Maintain BUY, cut target price by 9% to HK$16.70.
   
   

  

Analysis

• 1H26 operating profit beat but net profit missed due to non-operating items; raised dividend payout to 100% a surprise. Haidilao International Holding (Haidilao) reported its 1H26 results. In 1H26, revenue was Rmb22,337m (+8% yoy, -1% hoh), missing VA consensus by 1%. Gross profit was Rmb13,048m (+5% yoy, -1% hoh), with a gross margin of 58.4% (-1.8ppt yoy, -0.4ppt hoh), primarily due to: a) higher revenue contribution from businesses with lower gross margin, and b) impact of various consumer promotional concessions aimed at enhancing customer experience. Operating profit was Rmb2,457m (+12% yoy, -12% hoh), 5% above VA consensus, with an operating margin of 11.0% (+0.4 ppt yoy, -1.3ppt hoh). The yoy improvement in operating margin was driven by: a) lower labour costs (-2.0ppt yoy); and b) reduced depreciation and amortisation expenses (-1.5ppt yoy), which more than offset gross margin contraction and rising other expenses, primarily from increased charges by delivery platforms (+1.5ppt yoy). Core operating profit was Rmb2,513m (+4% yoy, -16% hoh), with a core operating margin of 11.3% (-0.4ppt yoy, -2.0 ppt hoh). Net profit was Rmb1,767m (+0.5% yoy, -23% hoh), missing VA consensus by 3%, with a net margin of 7.9% (-0.6ppt yoy, -2.3 ppt hoh).