Morgan Stanley: Downgrades HAIDILAO (06862) rating to "Equal-weight" and lowers target price to HK$10.5

Morgan Stanley released a research report stating that HAIDILAO (06862) providing its chairman with a loan of up to RMB 100 million for a one-month term could further weigh on investor sentiment. The bank downgraded its rating from "Overweight" to "Equal-weight" and lowered its target price from HK$16.5 to HK$10.5. The bank noted that the loan has limited financial impact on the company, but as a connected transaction, it could further intensify valuation pressure following the earlier reduction in shareholding by the major shareholder. Macro conditions and catering demand remain persistently weak, the table turnover rate recovery year-on-year is relatively sluggish, and the company has yet to see any clear catalysts. The bank lowered HAIDILAO's revenue forecasts for 2026 to 2028 by 1% and its earnings per share forecasts by 3% to 4%, reflecting slower-than-expected recovery in macro conditions and catering demand in the third quarter. The new target price implies 12x 2026 price-to-earnings ratio, more than 1 standard deviation below the average P/E since 2024. The bank believes that at the current price of approximately 10x to 11x 2026 to 2027 P/E and a dividend yield of over 7%, the risk-reward is reasonable.