20220127-招银国际-海底捞-06862.HK-Reforms_on_track,_but_hindered_by_pandemic_8页_1mb

Haidilao (6862 HK) Summary

Core Content

Haidilao, a leading Chinese hot pot restaurant chain, is currently under review by CMB International Securities. The report highlights the company's ongoing reforms aimed at improving product and service quality, as well as traffic recovery. However, the company is still affected by macroeconomic headwinds and the lingering impact of the pandemic.

Main Points

• Current Rating: HOLD
• Target Price (TP): HK$16.85
• Current Price: HK$17.62
• TP Downside: -4.4%
• Market Cap: HK$114,912 million
• Average 3-Month Turnover: HK$400.40 million
• 52-Week High/Low: HK$85.80 / HK$19.38
• Total Issued Shares: 5,459.0 million
• Shareholding Structure:
  • Mr. Zhang Yong: 42.83%
  • Ms. Shu Ping: 13.29%
  • Mr. Shi Yong Hong: 13.29%
  • Ms. Li Hai Yan: 13.29%
  • Other Management: 7.00%
  • Free Float: 10.30%

Key Information

• Earnings Summary:

  • Revenue (RMB mn): 26,556 (FY19A), 28,614 (FY20A), 37,958 (FY21E), 44,133 (FY22E), 50,187 (FY23E)
  • YoY growth (%): 56.5 (FY19A), 7.8 (FY20A), 32.7 (FY21E), 16.3 (FY22E), 13.7 (FY23E)
  • Net Income (RMB mn): 2,345 (FY19A), 309 (FY20A), -56 (FY21E), 2,059 (FY22E), 3,317 (FY23E)
  • EPS (RMB): 0.44 (FY19A), 0.06 (FY20A), -0.01 (FY21E), 0.39 (FY22E), 0.63 (FY23E)
  • YoY growth (%): 42.4 (FY19A), -86.8 (FY20A), -118.0 (FY21E), n/a (FY22E), 61.1 (FY23E)
  • Consensus EPS: n/a (FY19A), n/a (FY20A), 0.04 (FY21E), 0.49 (FY22E), 0.75 (FY23E)
  • P/E (x): 35.8 (FY19A), 254.2 (FY20A), n/a (FY21E), 37.6 (FY22E), 23.4 (FY23E)
  • P/B (x): 7.9 (FY19A), 7.7 (FY20A), 7.1 (FY21E), 6.0 (FY22E), 4.6 (FY23E)
  • Yield (%): 0.4 (FY19A), 0.9 (FY20A), 0.0 (FY21E), 0.8 (FY22E), 1.3 (FY23E)
  • ROE (%): 22.1 (FY19A), 3.0 (FY20A), -0.5 (FY21E), 15.9 (FY22E), 19.7 (FY23E)
  • Net Gearing (%): Net cash (FY19A), 16.1 (FY20A), 15.1 (FY21E), Net cash (FY22E), Net cash (FY23E)

• Earnings Revision:

  • Revenue (RMB mn): 37,958 (FY21E), 44,133 (FY22E), 50,187 (FY23E) vs. 42,356 (Old FY21E), 49,334 (Old FY22E), 60,365 (Old FY23E)
  • Gross Profit (RMB mn): 22,057 (FY21E), 25,778 (FY22E), 29,314 (FY23E) vs. 24,613 (Old FY21E), 28,816 (Old FY22E), 35,259 (Old FY23E)
  • EBIT (RMB mn): 579 (FY21E), 3,420 (FY22E), 5,042 (FY23E) vs. 2,399 (Old FY21E), 3,684 (Old FY22E), 6,291 (Old FY23E)
  • Net Profit (RMB mn): -56 (FY21E), 2,059 (FY22E), 3,317 (FY23E) vs. 1,265 (Old FY21E), 2,236 (Old FY22E), 4,193 (Old FY23E)
  • Diluted EPS (RMB): -0.011 (FY21E), 0.388 (FY22E), 0.626 (FY23E) vs. 0.239 (Old FY21E), 0.422 (Old FY22E), 0.791 (Old FY23E)
  • Gross Margin (%): 58.1 (FY21E), 58.4 (FY22E), 58.4 (FY23E)
  • EBIT Margin (%): 1.5 (FY21E), 7.7 (FY22E), 10.0 (FY23E)
  • Net Profit Margin (%): -0.1 (FY21E), 4.7 (FY22E), 6.6 (FY23E)

• Reforms and Recovery:

  • Since 3Q21, Haidilao has introduced several reforms, including restoring its large regions management system, re-opening its training center, and centralizing product development.
  • These reforms aim to improve table turnover, service quality, and operational efficiency.
  • The company reports a table turnover recovery rate of approximately 75%–79% in 1H21 and 2H21E, compared to 2019 levels.
  • However, the recovery is attributed to a low base and store closures rather than a strong rebound.

• Store Expansion and Closure:

  • The company is expected to open only ~35–75 net new stores in FY22E and FY23E.
  • It plans to close ~240 stores permanently and ~60 temporarily in FY21E.
  • Reoccurring costs (labor and rent) are expected to be controllable due to high staff turnover and friendly relationships with shopping mall brands.

• Valuation and Comparison:

  • The stock is currently trading at 38x FY22E P/E, higher than the 5-year historical average of 32x and China peers' average of 27x.
  • The 9% FY19–23E net profit CAGR is not attractive compared to the current valuation.
  • The report compares Haidilao with other companies in the sector, such as Jiumaojiu, Yum China, and others, highlighting the P/E, P/B, and other financial metrics.

• Assumptions and Projections:

  • Sales per restaurant growth is expected to be modest, with an overall average of 13.6% in FY22E and 8.1% in FY23E.
  • The average spending per guest is projected to grow by 2.4% in FY22E and 2.9% in FY23E.
  • The report also provides assumptions for the number of restaurants and their growth across different regions in China and outside the PRC.

• Key Revisions:

  • The report has revised down the target price to HK$16.85 due to macroeconomic headwinds and the slow recovery.
  • EPS estimates for FY21E–FY23E have been cut by 105%, 8%, and 21%, respectively.

Conclusion

Haidilao is undergoing reforms to improve service and product quality, which are expected to yield positive results over time. However, the company's recovery from the pandemic and macroeconomic challenges is gradual, and its current valuation is considered high compared to its peers and historical averages. The report maintains a HOLD rating with a revised target price of HK$16.85, reflecting cautious optimism about future performance.