This article is edited by: national Gold Haidilao International Holding: 1H19The operation performance is stable, but the market expectation is too high. "Haidilao International Holding of CICC: maintaining strong operation performance under the rapid store development"

First, what is Haidilao International Holding's excellence?

With Haidilao International Holding dynamic PE approaching 100x this year, how to treat its growth space and reasonable valuation has become the focus of attention in the industry. Since listing, Haidilao International Holding can be said to be excellent in cash, but is it worthy of a high valuation?

Maintain strong operating performance under the rapid expansion of the store.Haidilao International Holding's 2018 revenue was 16.969 billion, year-on-year + 59.5%, net profit 1.646 billion yuan, year-on-year + 60.2%, performance slightly exceeded expectations. The core reason for maintaining high performance growth comes from scale expansion. In 18 years, the company opened a net 193 stores, with a total of 466 stores by the end of the year.

More importantly, the company maintains a strong operating performance in the rapid expansion of stores. In 2018, Haidilao International Holding's turnaround rate was 5 times per day (4.9 times per day in the first half of 18), and same-store sales increased by 6.2% (6.4% in the first half of 18). The gross profit margin is 59.1%, which is basically flat, and the operating cash flow increases by 70.6% compared with the same period last year. Each index is consistent with the store growth.

In addition to financial indicatorsHaidilao International Holding's excellence is also reflected in the strong supply chain management ability and the "decentralized" store management system, which constitute the company's "moat":

1) Food materials and seasonings are purchased mainly through affiliated companies to improve efficiency and ensure the safety of food materials.

2) the management relies on the flat management system, formulates the salary incentive and promotion system, and binds the employees to the interests of the company, so as to ensure a high level of customer service.

It is precisely because Haidilao International Holding leads hot pot consumption to become a popular catering industry with broad market prospects, and at the same time continues to achieve high performance growth by virtue of rapid store expansion and high-quality operational efficiency, and this growth logic will continue for at least 2-3 years. Therefore, we give Haidilao International Holding high certainty and growth expectations, from this point of view, the valuation seems to have its rationality.

Second, continuously and repeatedly verify the correctness of logic

The previous talk about Haidilao International Holding's high growth, high certainty, first of all based on the assumption: the rapid expansion of stores, to maintain a strong operating performance. It is clear that both are indispensable to support high valuations, and if one day growth is mismatched or logically falsified, valuations will inevitably fall sharply and investors will have to bear losses immediately.

There is a flaw in the growth logic, which is the reason why Guojin Securities suggests the risk.

Store expansion accelerated, but the proportion of small stores increased.According to the Guojin report, Haidilao International Holding's domestic stores increased by about 100 to 530 in the first half of 2019, significantly faster than last year. However, in terms of store area, small stores below 900 square meters account for nearly 70% of the new stores, especially in new stores in low-line cities, with more than 80% of small stores.

As the number of tables in small stores is about 65, significantly lower than the 85 in traditional stores, Guojin suggested that the market's revenue estimates for new stores need to be adjusted downwards.

Passenger flow in first-tier cities is divided.According to the passenger flow data tracked by Guojin, in first-tier cities, although the old stores in the core business district have been at a high level for a long time by virtue of the advantage of location selection, due to the obvious expansion of stores, the performance of single-store customer traffic has begun to differentiate in the first half of 2019. The average daily passenger flow of old stores and sub-new stores is lower than that of other cities.

The dividend in low-line cities is still there, but its sustainability remains to be verified.Haidilao International Holding continued to sink in 2019, entering nine low-line cities, which is the driving force for the growth of overall passenger flow. However, the dining structure of low-line cities is different from that of the first and second lines, and the consumption demand of medium and large tables is higher. Guojin believes that whether the tentative behavior based on family and friends gathering can be transformed into small and medium-sized table-based dining habits is also the key to determine the performance of low-line stores in the future.

Combined with the number of tables in different cities, Guojin found that the change of turnover rate is consistent with the trend of passenger flow: because the stores in first-tier cities are too dense, the turnover rates of old stores and secondary new stores are the lowest in all cities.

Under the combined effect of the above factors, Guojin expects Haidilao International Holding's short-term average single-store revenue to continue to decline.

Finally, Guojin stressed that it agrees that the certainty of store growth and the strong influence of the brand can give Haidilao International Holding a valuation premium, but as mentioned earlier, there is a certain dislocation between the actual store operation and market expectations. the stock price implied that the compound growth forecast of 50-60% net profit in the next three years could not match the actual development industry, and the rating was downgraded to "reduction".

Summary

Although Haidilao International Holding is away from the ceiling of the store (the market is expected to be 1000-1200), there is still huge space, and the next 2-3 years are likely to be the best stage in Haidilao International Holding's life cycle.But at the same time, it is important to recognize that the 100x valuation reflects the market's conviction of the company's growth and full expectations of the vision, and when this expectation is as "perfect" as it is currently operating, the margin of safety disappears without a trace. Long-term risks have been accompanied.