Incident Overview: In 2023, the company achieved revenue of US$690 million/ +23% (the previous performance forecast was no less than US$680 million). The company's revenue growth was mainly due to continued recovery of overseas business, improvement of operating efficiency, store expansion, etc.; net profit to the mother of 25.3 million US dollars/ +161% (previously estimated at no less than US$24 million), the operating margin at the restaurant level was 9.0%, an increase of 4.9 pct over the previous year. In addition to Haidilao hot pot, the company continues to explore businesses such as fast food and halal hot pot.
Stores: Net opening of 4 stores in 2023, with a turnover rate of 3.5 times/ +17%.
1) Number of stores: By the end of '23, Haidilao had a net total of 4 stores (5 newly opened - 1 closed) to 115, including 70/17/18/10 in Southeast Asia/East Asia/North America/other regions respectively.
2) Turnover rate: In 2023, the company's overall turnover rate was 3.5 times/+17%, of which the same store turnover rate was 3.6 times/+20%. Among them, 23H1/23H2 were 3.3/3.8 times, respectively, and the turnover rate increased significantly from month to month. Total passenger traffic for the full year of 2023 is 26.7 million/ +23%
3) Customer unit price: 2023 customer unit price 24.8 USD/ -1.6%.
Cost side: Raw materials, labor, and discounted cost rates have decreased significantly, and operating efficiency continues to be optimized 1) Raw materials: raw material costs account for 34.2% /-1.0pct, mainly due to revenue growth and dilution, procurement cost optimization, and supply chain localization;
2) Employee costs account for 32.9% /-0.9pct. The number of employees increased as stores expanded and customer traffic increased. Combined with the increase in employee wages, employee costs increased 20% year over year, but the growth rate was still lower than revenue, so the employee cost rate declined.
3) Depreciation and amortization: Depreciation and amortization expenses account for 11.5% /-1.6pct.
Profit forecast and investment advice: The company is a leading Chinese food overseas brand. It adheres to a standardized and localized strategy, and the turnover rate has increased significantly. In the short term, we expect the company to accelerate its exhibition stores, and is optimistic about the broad market space for Chinese food to go overseas in the medium to long term. We expect net profit from 2024-2026 to be $0.49/0.684/79 million. The current stock price corresponds to PE 23/18/14 times PE, giving it a “recommended” rating.
Risk warning: Store opening is less than expected, demand recovery falls short of expectations, industry competition intensifies, etc.