CICC released a research report stating that 1H25 restaurant industry performance was largely in line with expectations. Brand same-store divergence continues, with beverage segments leading due to delivery subsidies and low base effects, while some full-service dining showed marginal improvement. Brand strategies are shifting toward balancing quality and efficiency, with significant cost reduction and efficiency gains. Continued attention on robust brands achieving store opening targets and adjustment effects of certain brands. Recommends Luckin Coffee, GUMING (01364), MIXUE GROUP (02097), YUM CHINA (09987), and DPC DASH (01405).

CICC's main points are as follows:

**Brand Same-Store Divergence Continues, Beverage Segment Leads, Some Full-Service Dining Shows Marginal Improvement**

In the first half of 2025, overall consumer demand inflection point has yet to arrive. Most beverage brands benefited from delivery subsidies and low base effects, recording strong same-store performance, while some full-service dining brands showed signs of marginal improvement in same-store data.

Specifically: The firm estimates 1H25 average same-store sales for GUMING/MIXUE/Luckin/Nayuki increased approximately 21%/13%/10%+/4% year-over-year respectively; Guoquan benefited from product innovation and operational optimization, with the company announcing 1H25 same-store growth in high single digits; Lvcha benefited from stable dine-in and continued delivery growth, achieving positive growth from May-August, while Xiaocaiyuan announced 1H25 same-store decline of 7% (with May-June flat year-over-year) and July already turning positive; Tongqinglou was affected by alcohol restrictions in June, with banquet and private dining room revenue experiencing some impact.

**Cost Reduction and Efficiency Improvement Continues, Some Companies Show Significant Profitability Improvement**

Xiaocaiyuan reduced raw material costs through scaled procurement, with the company announcing gross margin up 2.6ppt year-over-year, combined with automation equipment rollout and staff optimization, labor cost ratio improved by 4ppt; Lvcha benefited from supply chain scaled procurement, with the company announcing gross margin up 1.4ppt year-over-year; Tai Er, Nayuki, Xiabuxiabu and others continue optimizing underperforming stores, with 1H25 Tai Er same-store declining 19% but store-level operating profit margin basically flat year-over-year, while Nayuki and Xiabuxiabu significantly reduced losses (currently Nayuki profitable store ratio is 70%+); Helens actively improved gross margin, reduced rental costs and increased labor efficiency, with 2Q25 same-store daily sales declining but store operating profit margin improving year-over-year (from 26% in 24 to 29% in 25).

**Focus on Robust Brands Achieving Store Opening Targets and Adjustment Effects of Certain Brands**

1H25 Xiaocaiyuan announced net opening of 5 stores, Lvcha announced 1H25 net opening of 37 stores; Lucky Cup's single-store model refinement achieved some success, the firm expects year-end store count to reach approximately 8,000; Guoquan targets net addition of 1,000 stores in 25.

Suggest monitoring adjustment effects of certain brands, such as Tai Er's "Fresh" store format showing approximately 10ppt higher same-store growth than traditional stores in July-August, with the company planning to complete approximately 150 store adjustments by end-25 and complete all adjustments by end-26; Helens optimized partner store investment amounts and restarted direct-operated store expansion.

**Risks** Same-store and profit margins below expectations; competitive landscape deterioration; new model development below expectations.