The turnover rate of 2023H2 reached 3.8, and the operating performance was impressive, driving the restaurant's profit margin upward
Tehai International announced annual results. In 2023, the company achieved revenue of US$686 million/yoy +23% and net profit of US$25.257 million, turning a year-on-year loss into a profit. The increase in profit was mainly due to increased turnover rate, improved operating efficiency, and reduced impairment. The turnover rate in 2023 was 3.5, of which the 2023H2 turnover rate was 3.8, a significant increase from 3.3 in 2023H1. In 2023, the restaurant-level profit margin was 9.0%, up 4.9pct year on year, of which 2023H2 was 9.7%, up 1.4pct month-on-month. It opened 5 new restaurants throughout 2023 and entered the UAE market for the first time. Considering the focus on improving store quality and slowing down the pace of new openings in 2023, we lowered our profit forecast and added the 2026 profit forecast. We expect the company's net profit to be 46.9/62.8/80.4 million US dollars in 2024-2026 (originally 47.9/97.3 million US dollars in 2024-2025), corresponding to EPS of 0.08/0.10/0.13, and the corresponding PE of the current stock price is 23.9/17.8/13.9 times. The localization strategy gradually succeeded, and all regions overturned. The increase is obvious. There is plenty of space for Chinese food to go out to sea over a long period of time, maintaining a “buy” rating.
Opening stores focus on quality rather than quantity. The climbing cycle for new stores was drastically shortened, and store opening accelerated in 2024
Store side: As of 2023/12/31, the company operated 115 restaurants, of which 70 were located in Southeast Asia, 17 in East Asia, 18 in North America, and 10 in other regions. Five new restaurants were opened in 2023, and one was closed due to the transformation of its own property. The overall number of stores opened was lower than expected at the beginning of the year due to the elimination of unqualified projects, but the newly opened stores all achieved break-even within 3 months, and the quality of operation was excellent. As of the announcement of the results, Haidilao has opened 4 new stores in 2024 and entered the Philippines for the first time. We believe that all regional models have basically worked. The opening of stores in 2024 is expected to be faster than in 2023. It is expected that 2024/2025/2026 will open 11/14/19 new stores. Expense side: The proportion of raw materials/employee costs/depreciation and amortization in 2023 was 34.2/32.9/ 11.4%, respectively, compared with -1.0/-0.9/-1.6pct, which was greatly optimized. Along with the continued implementation of piece-rate pay+low base salary and high dividends, the refined management fee ratio continues to be optimized. The net interest rate is expected to continue to rise in 2024 without considering changes in exchange rates.
Adhere to the standardisation+localization strategy, focus on product innovation, and drive continuous growth through management optimization
By region, the company's turnover rate in Southeast Asia, East Asia, North America and other regions in 2023 was 3.5/3.6/3.7/3.8 times per day, an increase of 0.1/0.6/0.6/0.7 times per day over the previous year. The turnover in East Asia, North America and other regions increased significantly, and the localization strategy achieved phased success. The company added a “regional manager” level to reduce the management radius, give regions and countries greater autonomy and flexibility, enhance the continuous customer experience and optimize profit margins.
Risk warning: Risks such as store expansion falling short of expectations, increased competition in overseas Chinese food, and macroeconomic fluctuations overseas.