Profit margins at the restaurant level have been greatly improved, with a focus on optimizing operating efficiency and slowing down opening, Techai International released interim results. 2023H1 achieved revenue of US$324 million/yoy +31.8%, and net profit of US$3.394 million. The year-on-year loss was turned into profit. The increase in profit was mainly due to an increase in turnover rate, an increase in operating efficiency, and a decrease in impairment. The 2023H1 turnover rate was 3.3, the same-store turnover rate was 3.4, and same-store sales increased 12.9% year over year.
The restaurant-level profit margin was 8.3%, up 6.9 pct from the previous year and 2.2 pct from H2 2022. Considering the short-term focus on efficiency improvement and middle and back office construction, high cost investment, and the slowdown in store expansion, we lowered our profit forecast. We expect the company's net profit to be 19.6/47.9/97.3 million US dollars in 2023-2025 (originally 40.2/73.9/105.6 million US dollars in 2023-2025), corresponding to EPS of 0.0/0.1/0.2 US dollars. The current share price corresponding to PE is 52.1/21.4/10.5 times. Short-term profits are affected by impairment, exchange and headquarters expenses. There is plenty of room for Chinese food to go overseas for a long time, and the company gradually deploys multiple brands and can be expected to grow, maintaining a “buy” rating.
Continue to explore emerging markets, manage and operate with “open source” + “savings”, and continue to improve efficiency store-side: in the first half of the year, the company reopened 1 store, 4 new stores, and newly opened stores in Australia, the United Arab Emirates (new), Singapore and Thailand. As of 2023H1, the total number of overseas stores reached 115, covering 12 countries. The overall pace of opening stores in the first half of the year fell short of expectations. First, because the overall construction period overseas was long, and decoration, certification, etc. slowed down the progress of opening stores. Second, the first half of the year focused on improving the efficiency of store operations and emphasized lean growth. We believe we will return to the growth rate of store openings after completing internal efficiency improvements. We expect 11/22/31 new stores to be opened in 2023/2024/2025. Expense side: 2023H1's share of raw materials/employee costs/depreciation and amortization was 33.7/33.3/ 12.9%, respectively, compared to -1.5/-3.6/-0.7 pct, compared with the previous year, which was greatly optimized. The profit margin for the first half of the year fell short of expectations due mainly to the effects of depreciation and exchange profit and loss. Along with the increase in gross margin for regional procurement and continuous optimization of refined management expense ratios, net interest rates are expected to increase in the second half of the year.
The four regions are on the same page and are expected to gradually develop multi-brand business formats by region. Looking at 2023H1 Southeast Asia/East Asia/North America/Other regions, the revenue share is 57.6/11.5/19.8/ 11.1%, respectively, and the turnover rate is 3.3/3.1/3.2/3.5 times, up 0.1/0.5/0.4/0.7 times over the previous year. The restaurant-level profit margins are 10.9/5.7/5.8/ 1.8%, and all four regions have achieved restaurant-level profits.
The second brand will be a new growth point for Tehai International. Halal hot pot has great potential in the Southeast Asian and Middle Eastern markets. Currently, halal hot pot projects have been promoted and deployed simultaneously in Malaysia and Dubai.
Risk warning: Risks such as store expansion falling short of expectations, increased competition in overseas Chinese food, and macroeconomic fluctuations overseas.