Haidilao Shifts to Middle Office-Driven Growth, with Execution of Store Expansion and New-Brand Replication the Key

Overview

This report reviews Haidilao's 1H26 results call, focusing on the company's shift from a store-led to a middle office-driven operating model, as well as core-brand store expansion, new-brand replication, delivery growth, capital expenditure, and shareholder return arrangements. Goldman Sachs recognizes the efficiency-enhancement potential of centralizing resources through the middle office but believes that brand positioning, pricing, innovation, and organizational execution will still determine whether the reform translates into profitable growth, and therefore maintains its Neutral rating.

Core views

Haidilao is shifting its growth model from the historically individual store-driven approach to a headquarters middle office-driven model. 2026 is the first year of intensified middle-office capability building. Headquarters will centralize product planning, R&D, supply chain, marketing, and digital capabilities to reduce repetitive trial and error at the store level and replicate successful pilots more quickly across stores and brands. Goldman Sachs believes this resource integration could improve operating efficiency and cost control, although the ultimate outcome will still depend on each brand's positioning, pricing, innovation capabilities, and execution. For the core brand, table turnover rates in July and the first three weeks of August both improved month over month and rose slightly year over year, mainly supported by summer demand, new product launches, and IP- and family-themed campaigns. Management expects the middle-office reform and product upgrades to drive gradual improvements in store quality and table turnover rates. Haidilao's standard stores are expected to achieve mid-single-digit percentage net growth in 2026, with the pace of store openings accelerating in 2H26 and 2027. The company is also testing different store formats in lower-tier cities and prime locations in higher-tier cities, has identified dozens of potential sites in lower-tier cities, and will renovate or relocate older stores in phases. Franchise expansion will be pursued more cautiously. Regarding products and the profitability of existing stores, the company streamlined lower-contribution SKUs in 1H26 and refocused resources on more than 100 core SKUs that account for the majority of sales. It also upgraded product quality within the existing pricing structure, including clean-label products and freshly cut beef, with plans for further rollout in 2H26. Haidilao's restaurant-level margin was flat to slightly higher year over year in 1H26, while the delivery margin also improved year over year. However, the ramp-up of new stores meant that the Pomegranate Plan continued to weigh on profit. Management believes its impact at the group level is limited and expects brand portfolio optimization to gradually improve profitability. The Pomegranate Plan has shifted from broad testing and scale expansion to an efficiency-enhancement stage. Through more rigorous feasibility assessments and monthly reviews, resources are being concentrated on the validated Food-Stall Hotpot and sushi formats. Revenue from Pomegranate Plan brands reached RMB810 million in 1H26, up 130% year over year. Both priority formats are centrally managed by the group's middle office, with expansion expected to gradually accelerate from 2H26 and become the primary growth driver for revenue from other restaurants in 2027. Food-Stall Hotpot had 12 stores as of the end of July 2026, with average investment per store of approximately RMB15 million, revenue per store of approximately RMB5 million, a table turnover rate of approximately 4.7x in 1H26, and a typical investment payback period of less than 3 years. Management targets a mid-double-digit store count by end-2026 and a high-double-digit store count by end-2027. If operating performance meets expectations, the long-term store potential exceeds 100. Sushi currently has 3 stores. The initial model has been validated, but it remains in the capability-building and replication-preparation stage. Management plans to achieve a double-digit net increase in stores by end-2027. Delivery will remain a fast-growing but lower-margin business. In 1H26, single-person meal products accounted for 81% of delivery sales, and the company expects them to remain the pillar of the delivery business while it continues to expand self-operated delivery stations. Management expects delivery revenue to grow by a high-double-digit percentage in 2H26. Scale benefits have driven year-over-year margin improvement, but delivery margins remain below dine-in margins because of lower gross margins and higher platform fees. Goldman Sachs therefore cautions that the rising contribution from delivery and new businesses could weigh on the group's blended margin in the near term. Capital expenditure will support more proactive expansion. In 1H26, capital expenditure was primarily directed toward new stores, store renovations, and asset upgrades. Going forward, it will also support the expansion and renewal of the core Haidilao brand and the rollout of Food-Stall Hotpot and sushi. As upgrades and store expansion increase, depreciation and amortization expenses could rise again, particularly after the company benefited from several years of depreciation and amortization savings. Management did not commit to a fixed payout ratio but reiterated that shareholder returns remain a priority after meeting the funding needs of long-term growth. Dividends have historically been the main form of returns, while share repurchases have not been ruled out. Goldman Sachs is also focused on the impact of the operating model change on organizational incentives. Haidilao's previous store-centric model was effective at motivating employees, and whether this advantage can be sustained as the middle office gains greater importance will be a key point to monitor. Taking into account faster growth in delivery and new businesses, as well as slower core-brand store openings than Goldman Sachs previously expected, Goldman Sachs made only minor adjustments within ±3% to its 2026—2028 earnings forecasts. The core brand remains the primary profit contributor. Goldman Sachs maintains its Neutral rating and 12-month target price of HK$12.2, with the valuation still based on 9x average 2026—2027 EV/EBITDA, rolled forward from the previous 2026 basis.

Analysis framework

Goldman Sachs first used information from the 1H26 results call to review recent changes in table turnover rates, store expansion, product upgrades, and margins across businesses. It then analyzed how centralized R&D, supply chain, marketing, and digital capabilities in the middle office could support the renewal of the core brand and the replication of new brands. The report subsequently assessed the replicability of new formats using Food-Stall Hotpot's investment per store, revenue per store, table turnover rate, and payback period, as well as the validation progress of sushi, and evaluated the profit impact in conjunction with the delivery mix, capital expenditure, depreciation and amortization, and shareholder returns. Finally, Goldman Sachs made minor adjustments to its earnings forecasts and determined the target price using an EV/EBITDA multiple.

Methodology notes

• Valuation MethodEV/EBITDA valuation

  Target Price Method Based on 9x Average 2026—2027 EV/EBITDA

  This method values the company using a multiple of enterprise value relative to earnings before interest, taxes, depreciation, and amortization. Goldman Sachs maintained its 9x valuation multiple and rolled the earnings benchmark forward from 2026 to average 2026—2027 EBITDA, deriving a 12-month target price of HK$12.2.

• (Out-of-Vocabulary Method)

  Store Operating Metrics and Unit Economics Analysis

  The report assesses store quality and the replicability of new formats using table turnover rates, investment per store, revenue per store, payback periods, store counts, and expansion targets, and evaluates the profit impact in conjunction with ramp-up periods, the business mix, and changes in expenses.

• Competitive and Strategic FrameworkEconomies of scale / learning curve

  Centralized Middle-Office Capabilities and Cross-Brand Replication

  The report believes that centralizing product, R&D, supply chain, marketing, and digital capabilities can reduce repetitive trial and error at the store level, replicate validated models across more brands and stores, and improve the efficiency of businesses such as delivery through economies of scale.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Haidilao International Holding (06862.HK)

  Middle-office reform, core-brand store expansion, new-brand replication, and delivery growth constitute the future growth path, but profit realization depends on expansion efficiency and organizational execution.

  Strengths

  The core brand remains the primary profit contributor; the middle office can centralize product, R&D, supply chain, marketing, and digital capabilities; Food-Stall Hotpot has demonstrated relatively clear unit economics; and scale benefits have driven a year-over-year improvement in delivery margins.

  Weaknesses

  The Pomegranate Plan continues to be weighed down by the ramp-up of new stores, delivery and new-business margins are below those of dine-in, store expansion and renovations may increase depreciation and amortization expenses, and changes to the middle-office model may also affect the existing employee incentive advantages at the store level.

  Risks

  The recovery in table turnover rates, the pace of store expansion, the development of new brands and the franchise model, cost changes, and food safety could all cause operating results to deviate from expectations.

Key data

• 2026 Standard Store Growth GuidanceMid-single-digit percentageManagement expects the pace of store openings to accelerate in 2H26 and 2027.
• Recent Table Turnover Rate TrendImproved month over month and rose slightly year over year in July and the first three weeks of AugustSupported by summer demand, new product launches, and IP- and family-themed campaigns.
• Number of Core SKUsMore than 100After lower-contribution SKUs were streamlined in 1H26, the core SKUs accounted for the majority of sales.
• Revenue from Pomegranate Plan BrandsRMB810 millionUp 130% year over year in 1H26.
• Number of Food-Stall Hotpot Stores12 storesAs of the end of July 2026.
• Average Investment per Food-Stall Hotpot StoreApproximately RMB15 millionUsed to assess the unit economics of the new format.
• Revenue per Food-Stall Hotpot StoreApproximately RMB5 millionPer-store operating data disclosed in the report.
• Food-Stall Hotpot Table Turnover RateApproximately 4.7xIn 1H26.
• Food-Stall Hotpot Investment Payback PeriodTypically less than 3 yearsManagement is using this as a basis for replicating the format.
• Food-Stall Hotpot Expansion TargetMid-double-digit store count by end-2026 and high-double-digit store count by end-2027If performance meets expectations, the store potential exceeds 100.
• Sushi Store Count and TargetCurrently 3 stores; planned double-digit net store additions by end-2027The model has been preliminarily validated but remains in the capability-building and replication-preparation stage.
• Single-Person Meals as a Share of Delivery Sales81%In 1H26, and expected to remain the pillar of the delivery business.
• Expected Delivery Revenue GrowthHigh-double-digit percentage growth in 2H26The delivery margin improved year over year but remained below that of dine-in.
• Earnings Forecast AdjustmentsAdjustments to 2026—2028 forecasts within ±3%Reflecting faster growth in delivery and new businesses, while core-brand store openings were slower than previously expected.
• Rating and Target PriceNeutral; HK$12.212-month target price, based on 9x average 2026—2027 EV/EBITDA.

Impact & implications

The report believes that if the middle-office model can effectively integrate R&D, supply chain, marketing, and digital resources, it will help Haidilao improve store quality, reduce repetitive trial and error, and replicate mature formats, thereby supporting the renewal of the core brand and multi-brand growth. However, store expansion and new businesses will increase capital expenditure and depreciation and amortization, while the lower margins of delivery and new brands may also dilute the blended margin in the near term. Therefore, whether revenue expansion can translate into stable profitability depends on execution in areas such as brand positioning, product innovation, cost control, and employee incentives.

Risks

• The recovery in table turnover rates could be better or weaker than expected, affecting store revenue and profitability.
• The pace of store expansion could be faster or slower than expected.
• The development of new businesses under other restaurant brands and the franchise model could be faster or slower than expected.
• Cost savings could be stronger than expected, or the company could face adverse cost inflation.
• Food safety issues could damage operating performance.

What to watch

• Monitor whether the middle-office reform can continue to improve store quality, table turnover rates, operating efficiency, and cost control.
• Watch the execution of accelerated core-brand store openings in 2H26 and 2027.
• Track the brand positioning, pricing, innovation, per-store performance, and replication progress of Food-Stall Hotpot and sushi.
• Monitor whether Haidilao can preserve its existing employee incentive advantages after shifting from a store-led to a middle office-led model.
• Track the impact of the rising contribution from delivery and new businesses, store upgrades, and expansion on blended margins and depreciation and amortization expenses.