SUPER HI is a listed company spun off Haidilao's overseas business. It is mainly responsible for operations in regions other than Haidilao Greater China (mainland China, Hong Kong, Macao and Taiwan regions). Haidilao opened its first store in Singapore in 2012, then successively entered markets such as North America, Europe, and Oceania. In 2022, it spun off its international business into TEHCO and listed it on the Hong Kong Stock Exchange. It achieved dual major listing on NASDAQ in May 2024. As of June 30, 2024, SUPER HI has operated 122 stores worldwide, covering 13 countries, with stores in Southeast Asia/East Asia/North America/other regions accounting for 60.7%/14.8%/16.4%/8.2%, respectively.

Operating data and profitability are on the rise. 24H1 achieved revenue of 0.371 billion dollars (yoy +14.5%) and passenger traffic of 14.5 million people (yoy +17.89%). By region, 24H1 Southeast Asia/East Asia/North America/other regions accounted for 54.9%/12.1%/20.7%/12.3% of revenue, respectively. Southeast Asia is the company's largest market and has the highest number of stores opened each year. The pace of store expansion in North America is the second largest market after Southeast Asia, and the turnover rate in East Asia has increased significantly since 23H2. The company's UE model showed an upward trend. The 2022-2024H1 turnover rate was 3.3/3.5/3.8 times per day, the average daily revenue of each restaurant was 0.0154/0.0163/0.0172 million dollars, the same store grew 54.0%/8.8%/8.2%, the store operating margin was 4.1%/9.0%/8.7%, and the store's performance and profitability gradually improved.

The global Chinese food market is large, and there are many prospects for hot pot to go overseas. According to Frost & Sullivan data, the international Chinese food market size in 2022 was 306.1 billion US dollars, the penetration rate in the international food market was 9.9%, and it is expected to continue to grow at a CAGR rate of 7.8% from 2022 to 2027. However, the international Chinese food market is scattered, and the number of Chinese restaurant brands with more than 10 restaurants in the international market and Chinese restaurant brands operating in two or more countries each account for only 13.1% and less than 5.0% of the international Chinese restaurant market, so the opportunities in the international Chinese food market are also full of challenges. Looking at hot pot products, the total size of the international hot pot market reached 34.3 billion US dollars in 2022, accounting for 11.2% of the international Chinese food market. SUPER HI has the dual advantage of number of stores and coverage among domestic hot pot overseas brands.

Company highlights: The brand has an initial advantage+strong management system+foundational supply chain management capability+localization penetrates overseas.

1) The brand is beginning to gain international popularity: Haidilao ranked 14th in the 2024 “Top 25 Global Catering Brands by Value” and ranked first among Chinese food brands. 2) Connect interests and lock in management: Achieve bottom-up collaborative sharing through full authorization, mentoring and apprenticeship systems, piece-rate pay, etc., and establish an efficient management system with a three-tier management structure, rating system, and performance mechanism.

3) Continuing Haidilao's supply chain management capabilities: Hot pot ingredients grow together with Yihai, and have a complete management chain such as supplier selection, procurement, warehousing, and transportation. 4) Localization penetrates the local population and enhances customer experience through multiple measures: respect local customs through design such as dishes, restaurant atmosphere, and themed events; advanced technology and non-in-store dining services improve operational efficiency and consumer experience, and the company achieved about 50% of non-Chinese guests in 2023.

Investment advice: We expect the company's 2024-2026 revenue to be 0.8 billion US dollars, 0.933 billion US dollars, and 1.072 billion US dollars; net profit to mother will be 0.021 billion US dollars, 0.055 billion US dollars, and 0.073 billion US dollars, corresponding to the closing price on November 12, PE is 52/20/15 times, and PS 1.4/1.2/1.1 times, respectively. The Chinese food overseas market space is vast. The company is just in the early stages of releasing profitability. It is expected to usher in greater flexibility as brand potential increases and revenue side optimization performance. As a scarce target for domestic restaurants, it has been covered for the first time and has given a “recommended” rating.

Risk warning: 1) Risk of falling short of expectations in store expansion; 2) Food safety risk; 3) Overseas operation risk; 4) Profitability risk due to sharp rise in raw material costs; 5) Exchange risk.