1H23 achieved net profit of $3.394 million, reversing losses year over year
Tehai International 1H23 achieved revenue of US$324 million, +31.8% year on year; net profit of 3.394 million US dollars, reversing losses year on year; net profit margin of 1.05%, achieved interim profit for the first time. The restaurant-level profit margin was 8.3%, compared to 1H22+6.8pct, and 2H22+2.2pct. Since this year, the company has attached great importance to improving quality and efficiency. We believe that as UE becomes more mature, expansion and profitability are expected to increase. Looking at the medium to long term, the Haidilao brand has considerable space to go overseas. We maintain our profit forecast. We expect the company's EPS for 23/24/25 to be 0.03/0.08/0.10 US dollars. Based on 27X24E PE (see, comparable companies, Wind and Bloomberg's unanimous global average of 22 times PE, the company is in a period of rapid growth and broad overseas demand), we have given a target price of HK$16.99 to maintain the “buy” rating.
Single-store revenue increased year-on-year. For the first time, store-side profits in all regions benefited from a recovery in customer flow and a steady recovery. The turnover rate of 1H23 Tehai stores was 3.3 times per day (Vs1H223.0 times/day), the same store turnover rate reached 3.4 times/day, with a cumulative total of 12.3 million visitors, with an average daily sales of 156,000 US dollars, an increase of 9.85% over the previous year. By region, Southeast Asia/East Asia/North America/other regions topped 3.3/3.1/3.2/3.5 times per day. Restaurant management efficiency has been optimized. The profit margin at the restaurant level in 1H overall/Southeast Asia/East Asia/North America/other regions reached 8.3/10.9/5.7/5.8/ 1.8%. For the first time, store-side profits have been achieved in all regions. We believe it mainly benefits from the optimization of the personnel salary structure. In the long run, the company places emphasis on efficiency improvement and experience upgrading. On the one hand, it adjusts food prices to expand the customer base, and on the other hand, saves money by reducing losses and improving personnel efficiency. We expect that the profitability of a single store will continue to increase.
Global expansion requires patience. As of June 30, the new blue ocean of Chinese food is in broad demand and has a good pattern. As of June 30, the company covers 12 countries, has 115 stores, and has opened 4 new stores since the beginning of the year (1 each in the United Arab Emirates/Singapore/Thailand/Australia). The number of stores in Southeast Asia has reached 61%, accounting for 57.6% of the corresponding revenue. The company adopted a bottom-up expansion strategy, replicated the domestic “mentoring and apprenticeship system” system, and gave full play to the activism of front-end backbone. We believe that as operating experience continues to accumulate, we expect subsequent exhibition stores to accelerate (see net increase of 17 in '22). Based on the long term, we are still optimistic about the opportunities of Chinese food going overseas and the potential of Haidilao.
Maintain the target price of HK$16.99 and maintain the “buy” rating
We expect $23/24/25 EPS to be $0.03/0.08/0.10 (unchanged). Considering that the company is in a period of rapid growth and broad overseas demand, a 23% premium is given. Refer to the comparable company Wind and Bloomberg's unanimous global average of 22 times PE in 24 years, giving the company 27X 24 PE, with a target price of HK$16.99.
Risk warning: expansion falls short of expectations, market competition intensifies, and residents' willingness to spend in various countries has declined.