Net profit exceeds 4 billion, with a market value evaporating over 8.6 billion in a single day! What is Haidilao's "hidden concern"?

Haidilao’s “report card” has not satisfied the market.

On March 24, the leading restaurant chain Haidilao released its financial report for 2025. The report shows that Haidilao’s revenue for 2025 was 43.225 billion yuan, a year-on-year increase of 1.1%; net profit was 4.042 billion yuan, a year-on-year decline of 14%.

In response to this report, which showed increased revenue but decreased profit, the market reacted with a significant drop. The day after the report was released, Haidilao’s stock price fell by 11.07%, and its market value evaporated by over 9.8 billion Hong Kong dollars in a single day, approximately 8.65 billion yuan.

In fact, this is the first time Haidilao has experienced a decline in net profit since 2022.

Regarding the drop in net profit, Haidilao stated that it was mainly due to a decrease in restaurant turnover rates, a reduction in the number of self-operated restaurants leading to a decline in core restaurant operating income, and a significant increase in various costs such as raw material costs, marketing expenses, and administrative expenses.

Specifically, as of the end of 2025, Haidilao operated a total of 1,383 restaurants, including 1,304 self-operated stores and 79 franchised stores.

In addition to its main brand “Haidilao,” Haidilao Group is also continuously advancing new brand layouts in various niche areas such as seafood stalls, sushi, hot pot, and Chinese fast food, currently operating a total of 20 restaurant brands and 207 restaurants.

From the results, these new brands have not yet been able to support the company’s second growth curve.

The financial report indicates that restaurant operations remain Haidilao’s core source of income. In 2025, the company’s restaurant operating income was 39.063 billion yuan, a decrease from 40.880 billion yuan in the same period last year.

The fundamental reason for this situation is the decline in the core turnover rate of the main brand Haidilao’s stores.

According to the financial report, in 2025, the overall turnover rate of Haidilao’s self-operated stores was 3.9 times per day, a slight decrease from 4.1 times per day in 2024; the average customer spending was 97.7 yuan, which is basically flat compared to last year’s 97.5 yuan, showing a slight decline. Throughout the year, approximately 384 million customers were served, a year-on-year decrease of 7.5% compared to 415 million customers in 2024, a reduction of about 30 million customers.

Kanjian Finance believes that the challenges Haidilao currently faces are common problems for most restaurant companies. From an industry development perspective, changes in consumer preferences can easily lead to the emergence of phenomenal business formats. For example, the earlier boom in the hot pot sector led to a series of popular hot pot brands such as Jiumaojiu, Banlu Maodu Hot Pot, and Xiaobuxiang; similarly, after new tea brands like Nayuki and Heytea became popular, a host of well-known tea brands emerged, including Cha Baidao, Bawang Chaji, and Guming, with related sectors achieving relatively high market premiums in certain phases.

To achieve sustained revenue growth, constantly opening new stores or expanding other sub-brands has become an inevitable choice for enterprises. Against this backdrop, the self-operated asset-heavy model can place significant financial pressure on the company; therefore, opening up franchising and transitioning to a supply chain enterprise has become the optimal model to break the growth bottleneck.

However, it is worth noting that consumer preferences are not static. With the evolution of consumption preferences, some restaurant formats will be eliminated by the market, and those eliminated formats will significantly impact franchised enterprises. From Haidilao’s attitude towards opening up franchising, it shows an intention to layout in this direction, but it is relatively restrained.

The advantage of the self-operated model lies in its stronger ability to withstand risks in an industry downturn environment, which has been validated in Haidilao’s case. However, it should be noted that once a company’s growth slows down and its core business model is abandoned by the market, its valuation level will significantly decline.

We can clearly see that since 2022, although Haidilao’s performance has repeatedly reached new highs, its valuation level remains low. Even after making numerous adjustments and efforts in the past three years, the market is still not convinced. To seek a breakthrough, Haidilao’s founder Zhang Yong has chosen to return to the forefront.

Some analysts believe that the founder’s return to lead is usually a clear signal for a company to initiate strategic restructuring, which is expected to strengthen the concentration of Haidilao’s strategic judgment and shift the execution level towards results-oriented approaches, potentially leading to more aggressive structural adjustments within the group. Other media have also indicated that Zhang Yong’s return aims to retract diversified business lines, focus on the core hot pot business, optimize sub-brand strategies, and avoid blind trial and error.

Kanjian Finance believes that frequent adjustments to the management team reflect the anxiety of this restaurant leader regarding future development. Moreover, aside from focusing on the main business, the more diversified the company’s layout, the more issues it may face in the future.

After the financial report was released, Morgan Stanley published a research report stating that Haidilao’s revenue for 2025 is expected to rise by 1% to 42.8 billion yuan, with a net profit of 4.05 billion yuan, in line with the bank’s and market expectations.

Morgan Stanley noted that the most surprising aspect to the market was the company’s dividend payout ratio being lowered from 95% in 2024 to 86% in 2025. This adjustment may stem from the company’s plan to increase capital expenditure, intending to invest funds in automation upgrades, operational efficiency improvements, and the opening of new brand stores. The bank will focus on management’s statements on same-store operating efficiency, store network expansion plans, and profit margin guidance during the earnings conference; it anticipates that the company’s stock price may face short-term pressure but presents a low-position layout opportunity as the enterprise is increasing investment for future growth. In this regard, Morgan Stanley maintains a “buy” rating on Haidilao.

Citigroup analysts released a research report stating that Haidilao’s performance outlook for 2026 is more optimistic than market expectations. The bank holds a positive attitude towards the continued recovery of the Chinese casual dining industry, which is consistent with the views of beer manufacturer China Resources Beer.

The analyst also noted that Haidilao plans to increase capital expenditures to drive growth, which may be the reason for not raising dividends in 2025. Citigroup expects Haidilao’s revenue to achieve mid to high single-digit growth this year, thus maintaining a “buy” rating on Haidilao.