20211108-招银国际-海底捞-06862.HK-Another_step_taken_but_headwind_is_still_there_8页_1mb

Haidilao (6862 HK) Company Update Summary

Core Content and Key Information

Haidilao (6862 HK) has been downgraded to HOLD with a revised target price (TP) of HK$18.30, down from HK$34.06. The downgrade is due to macroeconomic headwinds in 4Q21E and 1Q22E, as well as the company's decision to suspend 300 underperforming stores for up to two years. This move is attributed to issues such as traffic cannibalization, poor store locations, and declining service levels due to a lack of well-trained staff and managers.

Haidilao's current price is HK$21.05, and it is trading at 41x FY22E P/E, which is 55% and 41% higher than the median P/E of 27x and 29x for China and international peers, respectively.

Main Views and Analysis

Store Closures and Operational Improvements

• Temporary closure of 300 stores: No staff will be fired, and the closure is expected to help improve traffic for remaining stores.
• Suspension of large-scale expansion: Stores will only be opened if table turnover reaches 4.0x.
• Operational measures: The company is implementing the "Peacock Plan" to enhance store operations, including overseas stores, and restructuring departments to enable micromanagement.

Financial Performance and Earnings Forecast

• Earnings downgrade: FY21E/22E/23E EPS is cut by 34%/39%/17% due to lower table turnover, slower expansion, and higher staff expenses.
• Revenue growth: Expected to grow at 15.1% in FY22E and 16.0% in FY23E, with a 26.2% increase in FY22E compared to FY21E.
• Net profit margin: Expected to improve in FY22E, with a 4.5% margin for FY22E and 6.9% for FY23E.

Cost and Expense Trends

• Staff costs have increased significantly, especially in 1H21, and are expected to continue at 33% of sales in FY22E.
• Property rent and related expenses remain stable at around 0.9% of sales.
• Utilities expenses are expected to stay at 3.5% of sales.
• Depreciation and amortization are projected to decrease slightly, from 10.8% in FY21E to 9.0% in FY22E.

Key Financial Figures

Earnings Revisions and Comparison

Valuation Comparison with Peers

Assumptions for Future Growth

• Store closures: Estimated to be 250/50 gross closures in FY22E/FY23E.
• Store openings: Estimated to be 100/150 gross openings in FY22E/FY23E.
• Net openings: Expected to be +386/-123/+90 in FY21E/FY22E/FY23E.
• Table turnover: Expected to be 3.0x in FY21E, 4.0x in FY22E, and 4.8x in FY23E.
• Sales per restaurant: Expected to grow by 15.1% in FY22E and 16.0% in FY23E.
• Average spending per guest: Expected to grow by 2.5% in FY22E and 2.5% in FY23E.

Conclusion

Haidilao's strategic move to close underperforming stores and slow down expansion reflects a response to operational inefficiencies and macroeconomic challenges. While these actions may improve traffic and profitability, the company is still facing cost pressures and lower-than-expected growth. The downgrade to HOLD and revised target price indicate a cautious outlook, as the current valuation remains higher than peers, and the operational reforms may not be sufficient to drive a significant recovery.