Analyst: Qin Zhongjie
SFC CE Ref:BNW258
Team member: Li Chen
Events:
Haidilao International Holding announces the annual results for 2018. Revenue in 2018 was 16.969 billion yuan, up 59.5% from the same period last year; the net profit attributable to company owners was 1.65 billion, up 60% from the same period last year.
In terms of business, the total number of restaurants increased from 273 at the end of 2017 to 466, a net increase of 193, with 200 new openings, in line with the management's 18-year target of 180-220; same-store sales increased by 6.2%.
In addition, Haidilao International Holding issued an equity acquisition announcement, and its subsidiaries entered into an equity transfer agreement with related parties and Hillhouse Capital. The target company mainly operates fake food-based fast food restaurants under the brand "U Ding". As of December 31, 2018, Youding operates 45 restaurants better than Beijing, Shanghai, Xi'an, Wuhan, Shenzhen, Nanjing and Yangzhou.
Comments:
Store growth in 2018 is in line with expectations
Store growth is the biggest driver of Haidilao International Holding's revenue expansion. By the end of 2018, Haidilao International Holding's total number of restaurants increased from 273 at the end of 2017 to 466, with a net increase of 193 and a new opening of 200.
According to the urban line level, the second-tier cities added the largest number of stores, reaching 87, while the number of first-tier cities, third-tier cities and below were 41 and 48 respectively, and 17 overseas. In terms of proportion, the proportion of new stores in first-tier cities in 18 years was about 21%, compared with 8% in 17 years; the total proportion of new stores in first-and second-tier cities reached 66%, compared with 49% of new stores in first-and second-tier cities in 17 years.Haidilao International Holding's store expansion has clearly refocused on first-and second-tier cities.
The operation index remains excellent under the high-speed expansion
With the substantial growth in stores, the operational indicators at the restaurant level have maintained a very excellent level. The overall unit price continued to rise, rising to 101.1 yuan from 97.7 yuan in 2018.Among them, the unit price of passengers in first-tier cities increased significantly to 106.1 yuan, while customers in third-tier cities and below retrogressed compared with the same period last year.We believe that from the perspective of consumption habits or consumption capacity, there is always a gap between third-tier and lower-tier cities and first-and second-tier cities.At the same time, middle and high-end catering belongs to optional consumption, and the weakness of macro-economy inevitably brings uncertainty of consumption acceptance.
In addition, the turnaround rate remained strong for 5 times per day. Just looking at the domestic data, second-tier cities enjoy the highest turnaround rate (5.3 times) and the second highest passenger unit price (94.8 yuan), while first-tier cities enjoy the highest passenger unit price (106 yuan) and the second highest overturning rate (5.1 times).We believe that the strong performance of the turnaround rate is still due to the company's leading word-of-mouth influence and high-quality dining experience. In addition, the use of a series of new technologies may also contribute to the upside-down rate. However, there is limited room for further improvement in the turnaround rate.At present, most of Haidilao International Holding's stores are open for 22 hours (9-7:00 the next day).
Same-store sales slow, but still support expansion
The growth of same-store sales depends on the turnover rate of old stores and the increase of customer unit price, which reflects the change of sales ability of mature stores of chain brands. Overall same-store growth has slowed significantly in 18 years, to 6.2 per cent from 14 per cent last year (6.4 per cent in the first half of 2018). Second-tier cities were the most serious, falling sharply from 14.5 per cent to 4.3 per cent, but slightly improved from 4.2 per cent in the first half of 2018. First-tier cities performed best, with same-store sales growing at 11.7 per cent, higher than the overall average of 6.2 per cent.
Compared with the same store sales growth rate in the previous two yearsHaidilao International Holding's 18-year data is far from satisfactory. With the increase in the number of stores and the diversion of old stores and after tasting fresh heat, same-store sales have entered a stable stage after rapid growth. However, the overall growth rate of 6.2 per cent is still very healthy and continues to lay the foundation for expansion.
What needs to be seen is whether the data continues to decline and the reasons behind it, such as the emergence of a large number of new catering brands, resulting in a decline in consumer loyalty to Haidilao International Holding.
Risk hint
Industry level: food safety risk; competition diversion from emerging catering brands.
At the corporate level: expansion in low-line cities is restricted by macro and other factors, and the speed of opening stores has slowed down significantly.
