At the end of January and the beginning of February, I wrote several Haidilao International Holding articles to the effect that according to the single-store financial model, the stock price of about 30 yuan and the market capitalization of 140 billion was no longer expensive.

At the time of writing those articles, Haidilao International Holding had not yet released the 2019 report, and now four months have passed. I would like to update my opinion with the data of the 19 annual report.

First of all, I still insistIt is not appropriate to use price-to-earnings ratio to value Haidilao International Holding.。

Due to the upfront investment of each new restaurant, it will take several months for the restaurant to break even after opening, so most new restaurants that opened in the second half of the year have made a negative contribution to the results of the year. If you use the price-to-earnings ratio, that is, the default report profit is proportional to the intrinsic value of the enterprise, you will regard those new restaurants opened at the end of the year as negative equity (if these restaurants do not open, the price-to-earnings ratio is lower and more "undervalued").

But from another point of view, would you be willing to divest these current loss-making restaurants for 0 yuan? Certainly do not want to, because these restaurants are full every day, the next year can make a lot of money, this is not self-contradictory?

So I think the most appropriate valuation idea is to start with a single store and first figure out the financial model of a restaurant, how much revenue and profit it has in a year, and then promote it. In this way, single-store revenue data is particularly important.

After the report in 2019, what surprised me most was that the same-store turnover, which I used to use as the basis for calculating single-store revenue, dropped from 154000 yuan in 2018 to 142600 yuan in 2019 (multiplied by 365 days). The average annual revenue of the same store dropped from 56.21 million yuan in 2018 to 52.05 million yuan in 2019).

However, this is not because the business of some restaurants has deteriorated, with an average growth of 1.6% of all 233 restaurants in the same store in 2018 / 2019.

So why did same-store revenue decline? If you look down more closely, you can find two reasons:

The difference of the same store structure of ①

The number of same-store stores (based on stores that have been open for more than 300 days in the past two years) increased from 145 in 2018 / 2017 to 233 in 20119 / 2018. Looking at the urban distribution structure of the same store in the past two years, we can find obvious differences-the proportion of stores in first-tier cities has dropped from 27% to 21%, while the proportion of stores in third-tier cities has increased from 18% to 24%.

In fact, looking at the table-turning rate alone, the third-tier restaurants are actually not inferior to the first-tier restaurants, but due to the great difference in the per capita consumption level (that is, ordering fewer dishes), their average daily turnover is only 119000 yuan, which is far behind by the 156000 yuan of the first-tier restaurants.

The operating benefit of the new ② store is not as good as that of the old store.

About 70 per cent of Haidilao International Holding's restaurants are opened in first-and second-tier cities, but if we look at the average daily turnover of same-store in first-tier and second-tier cities alone, we can see that both of them have declined-from 166000 to 156000 in first-tier cities and from 160000 to 145000 in second-tier cities.

In other words, new restaurants in first-and second-tier cities in 2019 are generally less profitable than old ones (although overall, the decline in the table-turning rate in 2019 is not large, from 5.04 / day to 4.84 / day).

This is precisely the biggest difference between Haidilao International Holding and the high-quality chain business: the new Vientiane City of China Resources will not let the existing Vientiane City lose a shop or charge a penny less rent; Tianli opened a new international school. It is only a matter of time before the old school loses a student, and it is only a matter of time before it is full. Opening more Yonghui supermarkets will not have any impact on its Yu Yonghui supermarket's financial situation.

And Haidilao International Holding, in a regional restaurant encryption process, there will inevitably be a decline in the rate of turning the table.

Of course, this is not to say that this is not good, on the contrary, in order to take care of the dining experience, the company actually intends to reduce the table turnover rate to slightly less than 5. After all, it is difficult to have a happy meal with guests waiting for 2-3 hours at the peak of weekends and 3-4 hours for special holidays.

However, the expansion of new stores will affect this feature of the single-store financial model, which really makes it more difficult for us investors to value the company.

The best way I can think of is to look forward, foresee a vague vision, and then calculate the return on investment to determine the current buying price.

Look at the number of stores first. The management of the company has made it clear that from the current business situation, they are very confident about the 3000 stores in the future. So at the rate of 768 at the end of 2019 and opening 300,400 a year, it is estimated that 3000 stores will be realized within 5-7 years.

And look at the revenue of the single store. At present, there are 233 stores with relatively mature operation, with an average turnover of 142600 / day x 365 days = 52.05 million in 2019. Under conservative circumstances, when the number of stores reaches 3000 after 5-7 years, the average annual turnover of each store is 50 million yuan (taking into account the impact of inflation, this is indeed very conservative. Shanghai Dilao 2017-2019 per capita consumption data: 97.7 yuan, 101.1 yuan, 105.1 yuan). In the neutral case, the average annual turnover of the single store is 55 million yuan after 5-7 years.

Finally, looking at the net profit margin, in a recent research summary, the company gave the current net profit margin of 15% Mel 20% for domestic mature stores and 10% Mel 15% for foreign mature stores. After the store is encrypted and the table-turning rate falls further in the next few years, I expect the net profit margin to fall to 10%, 12%.

To sum up, after 5-7 years, in a conservative case, Haidilao International Holding's annual net profit = 3000x5000 million x 10% = 15 billion yuan, in a neutral case, Haidilao International Holding's annual net profit = 3000x5000000 x 12% = about 20 billion yuan.

At that time, the reasonable market value should be 350 billion-450 billion yuan, compared with yesterday's close of 185 billion (38.3 yuan), there is still room to more than double (excluding dividends).

Of course, if Haidilao International Holding gropes for a "second curve" of growth at that time, it will be a different matter. In my opinion, this feasibility is still very great, because I believe that after a few years, people will still have a good impression of Haidilao International Holding, and the company can continue to maintain strong organizational vitality, as long as it has these two characteristics at the same time. It's hard to really have a ceiling that completely restricts its growth.

Especially the second point, after reading the Diary of Haidilao International Holding, written by Li Shunjun recently, my understanding has gone deeper.

Within Haidilao International Holding, the core value is that everyone is equal and both hands change fate. Zhang Yong once published an article entitled "Operation Swan" internally, which proves that it is worth reading:

It can be seen that no matter how poor your education and how low your background, as long as you are willing to work, dare to work hard, do a good job of hard work, and satisfy your customer service, you will certainly be discovered and reused by the company. Over the past decade, Haidilao International Holding has indeed trained a lot of "ugly ducklings". From the bottom of the minimum wage to the millions of annual salary of store managers and family heads, they have produced "Chinese Dream" with Haidilao International Holding as the background.

In the book, you can even find a sentence that Zhang Yong has been emphasizing internally:We train talents and make hot pot.

In my opinion, the boss who can say this sentence has fully understood the "soul" of the catering industry.

Yes, you can imitate my dishes, you can imitate my decoration, you can imitate my supply chain, but there is one thing you can never imitate. People-people who have fire in their hearts and light in their eyes-are the most important factors that determine the dining experience.

As a catering chain group with hundreds of stores, it is indeed very difficult to train a good talent team and establish a unified standard of good service. It needs a fair corporate culture, a strong incentive mechanism, job opportunities brought about by scale expansion, warm employee care, and solid profitability.。

And Haidilao International Holding, who happens to have all these five points, may not find a second one among the domestic catering chains.

Although the return on investment corresponding to the current stock price is not particularly attractive to me, and I can only give it a pocket observation position at most, I still want to say that China needs Haidilao International Holding, and young people who dare to fight need Haidilao International Holding. I myself will watch it, patronize it and bless it for a long time.