Thiser: It is expected that the majority of top dining brands in 25H2 will see a return to normal customer traffic.

Zheshang released a research report stating that the current recovery of the catering industry since early 2023 is determined by demand and pace is determined by supply. Top tea drink brands have gradually rebounded in 25Q1, and it is expected that top Western fast food/top dining will achieve same-store or positive growth in 25Q2/25Q3 respectively. In terms of customer traffic, with the normalization of year-on-year base numbers, it is expected that most top catering brands will achieve a positive customer flow in 25H2. As for customer unit price, with the improvement in the market, more top brands are stabilizing or recovering their customer unit price. Catering tea drinks are the preferred choice in the service consumption recovery. Zheshang's main points are as follows: Industry trends: the survival of the fittest is happening, top brands are becoming stronger. Zheshang believes that the current recovery of the catering industry since early 2023 is determined by demand and pace is determined by supply. Looking at the sub-sectors, based on the difference in supply change pace, the pace of the tea drink sub-sector is about 1 to 2 quarters ahead of Western fast food and dining sub-sectors, and top tea drink brands have gradually rebounded in 25Q1, and it is expected that top Western fast food/top dining will achieve same-store or positive growth in 25Q2/25Q3. In terms of net store openings, the overall catering landscape is gradually improving. According to Narrow Door's data, as of November 25, there was a net closure on a year-on-year basis in the overall catering sector; from a year-on-year perspective, only coffee, buffet, light food, Jiangxi cuisine, Yunnan cuisine, and other sub-sectors showed a net increase in stores on a year-on-year basis; looking at sub-brands, as of November 25, in the tea drink sector, brands such as HEYTEA and GUMING are showing better net store openings compared to the industry, demonstrating brand resilience. Zheshang believes that although there have been disturbances from the food delivery platforms' battle in 25Q2-25Q3, delaying the pace of supply clearing in some sub-sectors, the winners and losers are ultimately facing the same direction, with the withdrawal of food delivery subsidies, the winners and losers in the catering supply side are happening, and the situation is improving. In terms of individual stores, starting from 25H2, it is expected that most of the top brands will achieve same-store or positive growth. In terms of customer traffic, with the normalization of year-on-year base numbers, it is expected that most top brands will achieve a positive customer traffic in 25H2. In terms of customer unit price, with the improvement in the market, more top brands are stabilizing or recovering their customer unit price. According to Narrow Door's data, in November 25, top brands such as Haidilao, McDonald's, Heetea, and Luckin Coffee have seen a year-on-year increase in customer unit price; other top brands such as GUMING, Starbucks, KFC, Haidilao, and TaiEr have seen a month-on-month increase in customer unit price. After 2 years of market natural adjustment, the pressure of customer unit price decline has gradually converged or ended, and it is expected that the customer unit price of top catering brands will stabilize or rise in 25H2. Performance Outlook: dining is bottoming out, tea drinks are differentiated. Catering tea drinks are the first choice for service consumption recovery. The catering sector is currently a relatively scarce valuation bottom, and once there is an expectation of consumption recovery, all brands have strong elasticity compared to 2019. Brands with offline scarcity need to be given extra attention. Emphasizing the vitality of brands such as GUMING and the emotional value of brands like Haidilao, these catering tea drink brands cannot be completely replaced by online formats, and they have brand scarcity. 1) Dining and fast food: Customer unit price and same-store top brand have bottomed out, continue to focus on the progress and sustainability of the year-on-year growth recovery of each top brand. It is expected that top brands such as YUM CHINA, HAIDILAO, and GREEN TEA GROUP have already started to recover. HAIDILAO (06862): The brand attributes carry "emotional value," and management efficiency is gradually becoming evident. It is expected that the improvement in table turnover rates will drive improved income growth in the second half of 25; it is expected that high dividends will continue, with a dividend yield of about 5%, offering potential returns for shareholders. YUM CHINA (09987): Accelerating expansion is happening at the right time, offering sustainable high shareholder returns. It is expected that accelerated store openings will drive mid-single-digit system sales growth in the second half of 25, with the core operating profit margin expected to remain stable or improve year-on-year; total shareholder returns for 25-26 are estimated to be around $3 billion, corresponding to an annualized dividend yield (including buybacks) of about 9%. SUPER HI (09658): The only target for Chinese cuisine to go international, with ample room for store openings and in a growth period. The company has consistently achieved profits after deducting foreign exchange losses, and the scale advantage is gradually becoming evident. It is expected that under the accelerated store openings and improved table turnover rates, the second half of 25 will see high single-digit to low double-digit revenue growth, with continued improvements in net profit margin due to operational adjustments. GREEN TEA GROUP (06831): A leading brand in casual Chinese cuisine, actively expanding in second and third-tier cities. According to the company's plans, store opening growth is expected to remain around 30% in the second half of 25, and with rapid store openings, performance is expected to continue to grow at a high rate. DPC DASH (01405): Both store efficiency and new store openings are on the rise, indicating a growth period. It is expected that under accelerated store openings, the second half of 25 will continue to see about 25% revenue growth, with a sustained improvement in net profit margin. 2) Tea drinks: Do not fear the competition, net store openings are the best indicator of brand momentum. Combining the current net store opening growth rates, GUMING and MIXUE GROUP are still the preferred choices. GUMING (01364): The leading tea drink with significant growth potential. It is expected that with high same-store growth and accelerated store openings, performance in the second half of 25 will further improve. MIXUE GROUP (02097): A global leader in tea drinks, offering high-quality products at an affordable price, creating a solid competitive barrier. With high same-store growth and accelerated store openings of brands such as Mixue and Luckin Coffee, performance in the second half of 25 is expected to continue to grow at a high rate. Risk Warning: Macroeconomic fluctuations, food safety issues, and lower-than-expected store openings, etc.