20250327-招银国际-海底捞-06862.HK-Potential_store_and_margin_expansion_ahead_8页_1mb

Haidilao (6862 HK) Summary

Core Content and Key Information

Haidilao, a leading player in the China consumer discretionary sector, has shown resilience and growth potential despite challenges in store expansion. The company's FY24 results were a small beat, primarily due to a robust gross profit (GP) margin expansion. For FY25E, the analysis suggests a potential for a mild turnaround, driven by a combination of store expansion acceleration and continued margin improvements.

Main Points and Views

• Store Expansion:

  • In FY24, Haidilao opened 59 self-owned and 3 franchise stores, but closed 70 stores, resulting in a net decrease of 19 stores.
  • Management expects store closures to be lower in FY25E, with an estimated 20 closures, and a net increase of 40 stores.
  • The company is accelerating its store expansion, with a potential for a 3% YoY growth in the number of stores.

• Margin Expansion:

  • The company's GP margin reached 62% in FY24, up from 60% in previous estimates.
  • Improved input costs, supply chain efficiency, and the adoption of multi-store management are expected to support stable GP margins in FY25E.
  • Operational profit (OP) margin is projected to improve due to staff cost reductions and digitalization efforts.

• Sales and Net Profit Growth:

  • The forecast for FY25E includes a 4% sales growth and a 10% net profit growth.
  • The company's earnings are expected to continue to improve, with a projected 10.3% YoY growth in net profit for FY25E and 12.4% for FY26E.

• Dividend Yield:

  • The dividend yield for FY25E is estimated at 6%, providing a buffer against potential market downturns.

• Earnings Forecast and Revisions:

  • The company's net profit forecast for FY25E and FY26E was revised downward by 10% and 14%, respectively, due to higher-than-expected store closures.
  • However, the gross profit margin was better than expected, contributing to an improved outlook.

• Valuation and Target Price:

  • The target price for Haidilao is raised to HK$ 20.20, based on a 18x FY25E P/E ratio.
  • The current price is HK$ 17.62, and the stock is considered undemanding at 16x P/E, with a 6% yield offering downside protection.

• Financial Performance:

  • Revenue for FY24 was RMB 42.8 billion, with a 3% YoY increase.
  • Net profit for FY24 reached RMB 4.7 billion, a 5% YoY increase.
  • The company's operating profit increased from RMB 5.58 billion in FY23A to RMB 6.11 billion in FY24A.

• Market and Shareholder Information:

  • Market capitalization is HK$ 98,213.9 million.
  • The company is majority-owned by Mr. Zhang Yong (60.4%) and Mr. Shi Sean (9.4%).

• Share Performance:

  • The stock has shown positive performance in the last 1 month with an absolute return of 10.1%.
  • It has experienced a relative decline in the last 3 months, with a return of -11.3%.

• Key Assumptions:

  • Store expansion is expected to be more aggressive in FY25E, with a net increase of 40 stores.
  • Sales per restaurant are projected to grow to RMB 31 million in FY25E.
  • Table turnover rate is expected to improve to 4.1–4.2 times per day, driven by better pricing and product mix.

• Financial Summary:

  • The company's financials show a consistent trend of growth, with a significant increase in net profit and operating profit.
  • Cash flow from operations is expected to increase, supporting further expansion and margin improvements.

Conclusion

Haidilao is expected to experience a mild turnaround in FY25E, supported by a combination of store expansion acceleration and margin improvements. The company's strong GP margin expansion and potential for increased sales and net profit growth make it an attractive investment, despite the challenges in store closures. The current yield and valuation provide a degree of downside protection, and the target price reflects the potential for a re-rating. The company's financial performance and strategic initiatives suggest a positive outlook for future growth.