CICC released a research report stating that HAIDILAO (06862) is expected to maintain stable year-on-year table turnover in 2H25, with cost optimization exceeding expectations, demonstrating resilient profitability. Additionally, the report highlights the potential of new brands. CICC maintains an "Outperform" rating and raises the target price by 6% to HK$17. Key points are as follows:

**Same-Store Improvements Driven by Multiple Measures** HAIDILAO continues to implement its "Different HAIDILAO" strategy to enhance same-store performance, such as launching themed restaurants (over 50 late-night dining locations nationwide by October) and strengthening product innovation (fresh-cut meat offerings now available in all stores). Benefiting from a lower base and operational adjustments, CICC estimates HAIDILAO's table turnover will improve sequentially in 2H25 while remaining stable year-on-year. Average customer spending is also expected to remain steady.

**Cost Optimization Exceeds Expectations, Profitability Resilient** Despite rising raw material costs, CICC expects sequential margin improvement. Enhanced operational efficiency may reduce labor costs in 2H25, while depreciation expenses continue to decline. The report forecasts a significant rebound in 2H25 margins from 1H25 lows, with management targeting a sustainable long-term margin of around 10%.

**New Brand Strategy Optimization and Growth Potential** HAIDILAO has refined its new brand development approach, combining bottom-up proposals with top-down initiatives (e.g., newly launched Sushi restaurants). The company plans to systematically evaluate new brands in 1Q26 to determine future directions, potentially improving efficiency and resource allocation. Existing new brands include Yanqing BBQ (targeting 80-90 new stores in 2025) and Jugao Mini Hotpot (20-30 stores in lower-tier cities by October).

**Earnings Forecast and Valuation** Due to better-than-expected cost optimization, CICC raises 2025/26 net profit forecasts by 6%/7% to RMB4.01 billion and RMB4.71 billion, respectively. The current stock price implies 2025/26 P/E multiples of 19x/16x. The "Outperform" rating is maintained, with the target price lifted to HK$17 (22x/18x 2025/26 P/E), implying 15% upside potential.

**Risks**: Lower-than-expected table turnover; store expansion delays or closures; new brand setbacks.