Catastrophes and disasters are often the touchstone of excellent enterprises.When the industry is facing difficulties, weak enterprises will be more severely affected, a large number of withdrawal from the market.

Head enterprises will benefit from the withdrawal of small and medium-sized enterprises. This logic has been fully confirmed in the past year or two, the most typical of which is that under the background of the epidemic of classical swine fever in Africa, the share price of Muyuan shares began to rise at the end of 2018 and lasted until the beginning of 2021.

Haidilao International Holding is regarded as the enterprise that fully benefited from the COVID-19 epidemic-- the tide of closure caused by the forced closure of catering stores, which runs through the epidemic. Throughout 2020, Haidilao International Holding continued to expand and open stores, trying to further occupy the hot pot market through the reverse layout. Capital has a high degree of recognition of this strategy, during which the share price of Haidilao International Holding has risen greatly.

Haidilao International Holding's ultra-high valuation is more eye-catching than its share price-the company lost money after the outbreak, but the share price was pushed to higher heights, followed by a sharp rise in the price-to-earnings ratio, which has long been exaggerated at several hundred times.

But the situation changed after the Spring Festival in 2021. Since mid-late February, Haidilao International Holding's share price has fallen by more than 54% by mid-June, and shows no sign of stopping the decline. The market capitalization has fallen below HK $200 billion, and Zhang Yong, the head of the company, has lost his position as the richest man in Singapore.

The valuation "Great Leap forward" experienced by Haidilao International Holding in the course of the epidemic represents the capital's expectation of great changes in the catering industry, but after the epidemic situation in China has stabilized, the expected retaliatory consumption of hot pot has not appeared. nor did Haidilao International Holding's rapid occupation of the market.

In the hot pot track, the hypothesis that "head enterprises benefited from the epidemic led to the withdrawal of small and medium-sized enterprises" was falsified.The "industrial revolution" of the Chinese food industry seems to have been falsified once again.

01. From opening to closing

Low overturning rate and low plateau efficiency mean "oversupply".

In March, Haidilao International Holding issued a profit warning and reported a 90% drop in net profit in 2020 compared with 2019, meaning that the overall net profit was only about 235 million yuan. Haidilao International Holding's share price has been falling ever since.

But in early July last year, its 2020 semi-annual report also forecast an ugly performance, when its share price moved in the opposite direction.

In the first half of the year, the performance was huge and the stock price more than doubled; for the whole year, the profit was small, and the stock price plummeted by nearly half. Why is there such a clear and obvious change in the attitude of capital?

The reason on the surface is more obvious: the epidemic is in dire straits in the first half of 2020, and with the improvement of the domestic epidemic, consumer retaliatory consumption will push up Haidilao International Holding's performance in the second half of the year, and the strategy of opening a restaurant against the trend and the withdrawal of small and medium-sized hot pot restaurants from the market will bring more flexibility to the performance of enterprises.

But by the time the annual report was pre-disclosed, the situation was completely different:The expected consumption of retaliatory hot pot did not appear in the second half of the year, and Haidilao International Holding's turnaround rate was still declining even after 2021.According to Guoxin Securities, the turnaround rate of Haidilao International Holding restaurant was 3.5-3.7 times per day in March this year, and continued to decline to less than 3 times per day in April, falling below the break-even line.

The turnaround rate is one of the most important indicators for investors to observe catering enterprises. In the first quarter of 2021, the catering industry affected by the epidemic has actually nearly disappeared, while Haidilao International Holding's turnaround rate is declining, which is enough to worry investors.

Low overturning rate and low plateau efficiency mean "oversupply". If the expected consumers did not pour into Haidilao International Holding's store, thenStores for incremental consumers can only be closed.

Haidilao International Holding's semi-annual report for 2020 shows that a total of six restaurants were closed during the period, while the closure of restaurants was not clearly disclosed in the full-year financial report.

According to the calculation of big data organization "Jihai", from June 22nd to November 2020, Haidilao International Holding's business stores fell off a cliff, with only 522 stores falling to the lowest point this year. It is equivalent to a sharp reduction of 200 stores in three months from June 22, and began to pick up gradually after the end of September.

02. From expansion to dilution

With the promotion of large-scale store expansion, Haidilao International Holding's single store profit has been significantly diluted.

Any business decision is a combination of risks and returns, and if you want to obtain potential benefits, you must bear the corresponding risks.

For Haidilao International Holding, the most direct risk of opening a large-scale store is higher capital investment. By observing its financial data in 2020, we can see thatWhile Haidilao International Holding suffered from the closure of the epidemic, he also had to carry out a large-scale investment layout, resulting in serious bleeding.

Reflected in the financial figures, Haidilao International Holding's employee salary increased from 7.993 billion yuan in 2019 to 9.677 billion yuan in 2020. At the same time, its property, plant and equipment-- that is, various types of non-current assets-- have increased rapidly, from 7.69 billion yuan in 2019 to 12.064 billion yuan in 2020.

How can these investments be realized when the gross profit has increased by only 1 billion yuan?All kinds of debt financing has become the most simple and effective way.Haidilao International Holding's short-term loans increased by 3.599 billion yuan in one year, financial lease liabilities increased by 3.186 billion yuan, long-term loans increased by 245 million yuan, and "other accounts payable and accrued expenses" increased by nearly 1 billion yuan.

In order to support the business situation in 2020 and occupy the market after the end of the epidemic, Haidilao International Holding made a large-scale investment, but the final result was quite different from the strategic design.

Before the epidemic, Haidilao International Holding's profitability has been a continuous decline, individual store profit figures, net interest rates have been reduced to varying degrees. But at the time it was seen as an inevitable consequence of scale expansion.

However, with the promotion of large-scale store expansion, investors will find that Haidilao International Holding's single-store profits have been significantly diluted. Haidilao International Holding may have been too optimistic about how many stores a municipal district can accommodate.

This involves a heart-wrenching question:Is the hot pot market as big as expected? Or at least Haidilao International Holding hotpot is not facing such a huge market.

03. From large category to vertical category

Haidilao International Holding seems to occupy the hotpot market with the largest space and the strongest industrialization ability in the catering industry, but in fact there are countless small markets in the hot pot market.

Haidilao International Holding operates Sichuan hot pot, which belongs to one of the branches of hot pot market in China.

However, some investors do not position it as "Haidilao International Holding Sichuan-flavored hot pot", but gradually regard it as the concept of "pan-hot pot", or even the representative of hot pot.All the calculations on the hot pot market capacity and the judgment on the valuation of Haidilao International Holding are almost based on the overall spatial scale of the hot pot market.

The most typical valuation logic is: hot pot is a trillion-class market, in which Haidilao International Holding's market share is 6%, and with strong capital strength, management ability and supply chain support, Haidilao International Holding still has up to 94% of the market space to compete for in the future-just like the reverse expansion during the epidemic.

The picture below is a typical category of food and beverage, and we see hot pot as a whole. But what is the actual situation? Hot pot includes Sichuan hot pot, Chongqing hot pot, copper pot rinse meat, Chaoshan beef pot, fish hot pot and so on, among which there are significant differences between the south and the north, although Haidilao International Holding and copper pot rinse meat are more popular in the north. But Tan Duck Blood and Baheli also occupy a large market in the south.

In other words, Haidilao International Holding seems to occupy the largest space and the most industrialized market in the catering industry, but there are many small market segments in this market, and a considerable number of consumers are framed in some subcategories of hot pot because of taste problems.The market share really left to "Sichuan-flavor hot pot" may not be as large as imagined.

As the saying goes, it is difficult to adjust, and the changes in consumers' tastes and preferences are the pain points that every catering enterprise must face. A similar situation occurs in the milk tea industry. Almost all of the earliest milk tea products are pearl milk tea, but with the continuous subdivision of the industry, enterprises are trying to find their own vertical space, including Chilled Mango Sago Cream with Pomelo with seven points of sweetness and burning immortal grass with books, and more and more sub-categories have come out.

For consumers, this means more choices and better consumer experience. But for businesses, it means watching themselves from a large category that is suitable for everyone to be dried into a small category, which is bound to be uncomfortable.

04. Write at the end

Zhang Yong once thought about a very disturbing topic: "how did I die? I have to figure it out." "

In what may be the most competitive industry in the world, Haidilao International Holding has reached an unprecedented height, and I am afraid it will be very difficult for him to do so without thinking clearly about how to die.

To this end, we see Haidilao International Holding's standardization, the ability to manage employees and organizations, its sense of brand and products, and the key role that capital plays in its development.

To be fair, Haidilao International Holding has almost achieved the extreme that a Chinese food enterprise can do, controlling all the resources that can be controlled. ButEven so, you still have to face the problems in the industry.The difficult problems of competition, confrontation, entanglement, balance, innovation and success linger like fate.