In May, the message was one of firm confidence, backed by a 152 million yuan share purchase. By September, a family member was selling 2.75 billion yuan at a discount. This is the awkward gap between an old engine that's sputtering and a new one that hasn't fully ignited yet.

On September 9th, HAIDILAO (HK: 06862) shares touched HK$10 during intraday trading, at one point plunging more than 12%. The stock closed the morning session near HK$10.30, down 9.49%, with turnover of approximately HK$3.339 billion.

Sixteen block trades before the market opened were the direct catalyst for this decline, totaling 259 million shares at HK$10.62 per share. This represented a discount of roughly 6.7% to the previous day's closing price of HK$11.38, amounting to approximately HK$2.75 billion.

According to reports, the seller in this placement was Shu Ping, wife of founder Zhang Yong, with UBS managing the deal. Morgan Stanley subsequently confirmed this in a research report. At the time of writing, HAIDILAO has yet to issue a formal announcement on the seller's identity, and all information regarding the reduction comes from media and institutional research sources.

The HK$2.75 billion sum is more than 1.5 times HAIDILAO's net profit attributable to shareholders for the first half of the year. However, what truly unsettled the market is not the amount itself, but the timing gap between two completely opposite actions.

The Confusing Disconnect Within Four Months

On April 10th, HAIDILAO announced that Zhang Yong planned to increase his holdings with personal funds over the next 12 months, with a minimum amount of HK$100 million. Between May 21st and 22nd, he bought 11.35 million shares on the open market at an average price of approximately HK$13.39 per share, spending around HK$152 million. The announcement clearly stated his confidence in the group's overall development prospects and potential growth, leaving the door open for further increases at appropriate times.

Fast forward to September. If Morgan Stanley's assessment is correct, a family member of the same founder sold 259 million shares at a price between HK$10.60 and HK$10.70, a discount to the market. Bought at HK$13.39 in May, sold at HK$10.62 in September—a difference of about 20% in less than four months. Morgan Stanley's words were 'surprising.'

Put simply: in April, the market was told 'I'm bullish.' In May, HK$152 million was spent on real purchases. In September, the founder's family sold HK$2.75 billion at a discount. Which statement are investors supposed to believe? Hong Kong is a market that pays close attention to signals. You don't need a press conference; your account activity speaks for you.

The Mid-Year Report Already Offered a Glimpse

The more critical issue isn't this single transaction, but the interim results released on August 25th. The trade merely re-stated the problems in the earnings report through share price action.

Revenue for the first half reached RMB 22.337 billion, an increase of 7.9% year-on-year. Net profit attributable to shareholders was RMB 1.767 billion, a mere 0.5% increase. Core operating profit was RMB 2.513 billion, up 4.4%.

A 7% revenue growth yielded only a 0.5% profit growth. In financial terms, this is classic 'growth without profit.' The pie is getting bigger, but less is being retained from each dollar of revenue.

A deeper dive reveals a more telling picture: revenue from HAIDILAO's core restaurant operations fell 4.0% to RMB 17.837 billion. Meanwhile, delivery revenue surged 121.2% to RMB 2.051 billion; other restaurant business revenue jumped 113.1% to RMB 1.271 billion; condiment and ingredients sales rose 94.6% to RMB 902 million; and franchise business revenue grew 179.9% to RMB 254 million.

The growth is entirely in peripheral businesses, while the decline comes from the main brand's dine-in service, the core of its thirty-year history. HAIDILAO restaurant revenue now accounts for only 79.9% of total revenue. The company attributes the decrease to a reduction in the number of restaurants. Self-operated stores fell from 1,322 to 1,290 in the first half, with 24 new openings, 32 closures, and 6 conversions to franchise. Last year saw 79 new self-operated stores; this year it's 24, a drop of nearly 70%.

This isn't expansion—it's a strategic shuffle to maintain revenue through delivery, sub-brands, and franchising while closing stores.

Rising Table Turnover, Falling Average Spend

The two most telling indicators are moving in opposite directions. The table turnover rate for self-operated restaurants rose from 3.8 to 3.9 times per day, but the average customer spend fell from RMB 97.9 to RMB 97.0. More people are coming, but each is spending less—a clear sign of trading price for volume.

HAIDILAO has been running consumer-friendly promotions. Items like 0.9 yuan products might seem cheap alone, but across hundreds of millions of customer visits, the impact shows in same-store sales declining 1.3% to 1.4% year-on-year.

Second-tier cities are suffering the most, with restaurant revenue down 8.0%, the worst of all city tiers. While first-tier cities maintain an average spend of RMB 104.2, second-tier cities have already fallen to RMB 96.0. HAIDILAO's densest markets are under the most pressure.

This shift reflects the ebbing of its service premium. For three decades, HAIDILAO could price itself RMB 10-20 higher than competitors based on its 'unmatchable' service. Now that pricing power is weakening—not because the service has deteriorated, but because fewer customers are willing to pay extra for the pampering experience. When service transitions from being a differentiator to just the industry baseline, customers start asking the next questions: Is the food good? Is it priced fairly? Is it worth it?

New Curves Growing Fast, But Profits Lag Behind

In all fairness, the growth in delivery and sub-brands is genuine, not a financial adjustment. Delivery revenue of RMB 2.051 billion now accounts for 9.2% of group revenue, up from 4.5%, driven mainly by single-serving products like rice bowls and ready-to-eat dishes. Under the 'Red Pomegranate' plan, the company operates 21 other restaurant brands across 183 outlets, with two concepts—food court hotpot and sushi—identified as ready for scaled replication starting in the second half.

But the cost is visible in the income statement. Raw materials and consumables cost as a percentage of revenue rose 1.8 percentage points year-on-year to 41.6%, primarily due to the higher share of lower-margin delivery and multi-brand businesses. 'Other expenses' grew 38.9% to RMB 1.510 billion, attributed mainly to increased delivery platform and operational costs. Every extra dollar of delivery revenue brings with it higher platform commissions and fulfillment costs. Volume is up, but margins are down, with core operating margin dipping slightly from approximately 11.6% to 11.25%.

Meanwhile, franchise stores increased from 41 to 99. Franchisees cover rent, renovation, and labor, while HAIDILAO provides the brand and supply chain. This asset-light model looks good on paper, but changes the fundamental profit structure—from earnings derived from operating stores to collecting franchise fees and supply chain margins from others' stores. This transition isn't inherently wrong, but transition periods are always the most expensive. The old engine is sputtering, the new one hasn't caught fire, and that's the difficult stretch right now.

What Is This Predicament Really About?

There's a saying in the restaurant industry: success comes down to three things—whether people want to come, how much they spend when they arrive, and how many tables you can turn in a day. HAIDILAO perfected the first over thirty years. Now all three are in a simultaneous adjustment phase. People still come, but they're spending less. The table turnover rate of 3.9 times per day still falls short of the company's internal breakeven reference point of 4.0 times. Average spend keeps declining, leaving little room for more price-for-volume strategies.

Stores are being deliberately trimmed. With 32 closures, 24 openings, and 6 conversions, there's a net reduction of 8 self-operated stores. This isn't a contraction strategy—it's a necessary cleanup after years of rapid expansion. And cleanup has a cost: the 'other gains and losses' line swung from a gain of RMB 235 million to a loss of approximately RMB 97 million, related to asset disposals, store closure impairments, and reduced conversion gains.

The organization is also shifting from a 'hero store manager' model to a platform-driven approach. HAIDILAO's most valuable asset has always been its ability to manage people effectively: waitstaff with dignity, store managers with ambition, and an honest relationship between headquarters and stores. Zhang Yong returned as CEO in January, and this was the first interim report since his comeback. Consolidating 21 brands and 183 stores from 'broad exploration' to 'focused replication' requires learning costs.

All three factors combined form the real backdrop for the share price falling to HK$10. The block trade simply triggered a concentrated release of sentiment.

There have never been eternal champions in the restaurant industry. Quanjude, Xiang-E-Qing, Zhen Gongfu, Xibei, and Coco Ichibanya were all once considered the standard answer in their eras. Consumers don't wait for anyone—if they'll queue for two hours at your door today, they'll try another brand's budget hotpot tomorrow.

So the real question HAIDILAO needs to answer isn't 'Will the stock price recover?' When service is no longer scarce, what will bring customers through the door again? Cheaper prices? Better food? More convenience? Or will they develop a new competitive edge that others can't easily copy?

If both Zhang Yong's May purchase and Shu Ping's September discounted sale are ultimately confirmed, the story they tell isn't about a 'family dispute,' but a more basic signal: this company is at a critical point where it must re-answer the question of what it's truly worth through actions, not words. Share prices will rebound, traffic will shift, and trends will change. But a restaurant brand surviving three decades isn't built on how well you tell a story—it's about whether customers are willing to come back after the tables are turned.

This article is based on HAIDILAO's mid-year results announcement, Hong Kong Stock Exchange filings, Bloomberg reporting, and Morgan Stanley research. The seller's identity is subject to the company's subsequent announcements. This content serves as a business case analysis and does not constitute any securities investment advice.