20220901-招银国际-海底捞-06862.HK-Reformed_successfully_and_may_reopen_stores_7页_1mb

Haidilao (6862 HK) Company Update Summary

Core Content

Haidilao, a leading player in the Chinese catering sector, has demonstrated resilience and effective reforms despite the challenges posed by the pandemic. The company's performance and outlook have been evaluated by CMB International Global Markets, highlighting key improvements in operational efficiency and market recovery.

Main Points

Financial Performance in 1H22

• Sales: Decreased by 17% YoY to RMB 16.8 billion, with a 10% decline per store and a 10% drop in store count.
• Net Loss: Recorded a net loss of RMB 266 million, inline with the profit warning.
• Table Turnover: Resilient in mainland China at 2.9x (vs 3.0x in 1H21), and strong recovery in overseas at 3.0x (vs 2.2x in 1H21).
• Cost Control: Excellent, with a high gross profit margin of ~58% and stable staff costs ratio at ~35% of sales.

Positive Outlook for 2H22E

• Store Impact: The number of affected stores was reduced from over 200 to just 90-30.
• New Store Growth: Continued expansion with new stores ramping up and improved table turnover.
• Economics: Breakeven table turnover lowered to 2x or above.
• New Products: More new product launches, including delivery and pre-made foods.
• Employee Motivation: Improved with higher profit sharing starting in May 2022.

Store Opening Resumption

• Hard Bone Plan: Management is resuming store openings with a focus on quality and performance.
• Strategies: Detailed analysis of table turnover impact, varied KPIs and profit sharing methods, and prioritization of locations with better foot traffic.

Key Information

Target Price and Rating

• Rating: Maintain BUY.
• Target Price: HK$21.62 (up from previous TP of HK$15.59).
• Current Price: HK$18.60.
• Up/Downside: 16.2%.

Shareholding and Performance

• Shareholding Structure:

  • Mr. Zhang Yong: 57.44%
  • Ms. Shu Ping: 7.37%
  • Mr. Shi Yong Hong: 7.79%
  • Ms. Li Hai Yan: 6.03%
  • Other management: 7.00%
  • Free Float: 14.37%

• Share Performance:

  • 1-month: 11.5%
  • 3-month: 18.9%
  • 6-month: -2.6%
  • 12-month: -40.6%

Market Valuation

• P/E Ratio: Trading at 33x FY23E P/E, higher than the 5-year average of 31x and China peers' average of 21x.
• P/B Ratio: Trading at 9.8x, lower than the 5-year average of 10.9x.
• Yield: 0.9% for FY23E.
• ROE: 25.8% for FY23E.

Peer Valuation

Financial Assumptions

Financial Summary

Income Statement

• Revenue: Increased from RMB 28,614 million (FY20A) to RMB 55,005 million (FY24E).
• Gross Profit: Ranged from RMB 16,353 million (FY20A) to RMB 31,413 million (FY24E).
• Net Profit: Ranged from RMB 309 million (FY20A) to RMB 3,633 million (FY24E).

Cash Flow Summary

• Net Cash from Operating: Increased from RMB 2,921 million (FY20A) to RMB 9,110 million (FY24E).
• Net Cash from Investing: Decreased from RMB 4,691 million (FY20A) to RMB 550 million (FY24E).
• Net Cash from Financing: Increased from RMB 2,340 million (FY20A) to RMB 6,865 million (FY24E).

Balance Sheet

• Total Net Assets: Increased from RMB 10,234 million (FY20A) to RMB 15,975 million (FY24E).
• Shareholders' Equity: Increased from RMB 10,234 million (FY20A) to RMB 15,928 million (FY24E).

Conclusion

Haidilao has successfully implemented reforms, showing improved performance and cost control. The company's overseas market is recovering strongly, and the potential resumption of store openings under the "Hard Bone" plan is a positive development. Despite the challenges posed by the pandemic, the company is expected to maintain a BUY rating with a target price of HK$21.62. The financial metrics indicate a positive trajectory, with improved gross margins and net profit margins, and a strong cash flow position. The company's valuation is currently higher than the 5-year average and China peers' average, reflecting investor confidence in its future growth and performance.