According to Zhitong Finance APP, Minsheng Securities released a research report stating that it maintains a "recommend" rating for super hi (09658) and forecasts the company's revenues for 2024-2026 to be 0.794 billion USD, 0.903 billion USD, and 1.008 billion USD, respectively; net income attributable to the parent company will be 0.038 billion USD, 0.052 billion USD, and 0.068 billion USD. Relying on super hi's brand influence, refined management philosophy, and localized innovation-driven strategy, the company has wide expansion space in overseas markets.

Event: On November 25, 2024, super hi will release the third quarter performance for 2024, achieving quarterly revenue of 0.199 billion USD, a year-on-year increase of 14.6%; operating profit of 0.015 billion USD, a year-on-year increase of 52.0%; operating profit margin of 7.5%, a year-on-year increase of 1.8 percentage points; net income attributable to the parent company was 37.72 million USD, turning profitable year-on-year, with a net margin of 19.0%. Operating cash inflow was 40.7 million USD.

The main points of the Minsheng Securities report are as follows:

The simultaneous rise in quantity and price drove a 14.5% year-on-year increase in restaurant revenue, while takeout and other business segments also maintained good growth due to increased customer flow.

1) Table turnover rate: The overall average for Q3 was 3.8 times/day, compared to 3.7 times/day in the same period last year; among which Southeast Asia/East Asia/North America/Other were 3.6/4.3/3.9/3.8 times/day respectively, year-on-year +0.1/+0.4/0/-0.1 times/day. 2) Average spending per customer: Overall 25.8 USD, year-on-year +8.9%, among which Southeast Asia/East Asia/North America/Other were 20.4/29.2/43.5/43 USD respectively, year-on-year +9.1%/+12.3%/+5.6%/+10.8%. The simultaneous rise in quantity and price drove restaurant revenue growth, and Q3 restaurant operating revenue was 0.191 billion USD, a year-on-year increase of 14.5%. In Q3, the total customer flow in restaurants was approximately 7.4 million visits, a year-on-year increase of 4.2%. With increased customer flow, takeout and other businesses also maintained growth, with Q3 takeout revenue at 2.6 million USD, a year-on-year increase of 8.3%, and other revenue at 5.1 million USD, a year-on-year increase of 21.4%.

The number of restaurant locations is relatively stable, with same-store growth of 5.6%.

1) Restaurant scale: No new stores opened during the quarter, as of Q3 2024, the total number of restaurants operated by the company is 121, with a net increase of 6 locations in the first three quarters, and the total number of new stores for the year is expected to be in double digits. 2) Same-store performance: In Q3, overall same-store sales growth was +5.6%, with the East Asia region showing the largest growth of +20.5%; same-store average table turnover rate was 3.7 times/day, remaining stable year-on-year.

Reasonable control of cost expenses, reducing costs and increasing efficiency to enhance profitability.

The gross margin for Q3 is 67%, +1.4pct year-on-year, mainly due to the company's initiatives in supply chain layout and process optimization. In the future, the direction for reducing costs and increasing efficiency is to alleviate the burden on each store and enhance product scalability and standardization. Employee cost expense ratio is 33.1%, +0.2pct year-on-year; rent and related expenses are 2.7%, -0.4pct year-on-year; utility expenses and depreciation amortization expense ratio remain relatively stable year-on-year; other related expense ratio is 9.4%, -1.2pct year-on-year. With improvement on the income side and operational leverage combined with reasonable control of cost expenses, profitability has significantly improved, with 24Q3 operating profit margin at 7.5%, +1.8pct year-on-year.

The localization global strategy + pomegranate plan to tap into market potential.

Currently, the proportion of local customers in the Asia region can reach 80% to 90%; in North America and other regions, the majority still consists of Asian customer groups, with room for improvement in the proportion of local customer groups. The company promotes the localization global strategy and the pomegranate plan to progress simultaneously, actively driving the incubation of new business formats around store trade circles, forming a synergy with the main brand and enhancing the penetration rate in a single market.

Risk warning: 1) Risk of expansion not meeting expectations; 2) Food safety risk; 3) Overseas operation risk; 4) Risk of significant increase in raw material costs affecting profitability; 5) Exchange rate risk.