"Sinking" Haidilao

On May 10, Haidilao (06862. HK) closed at 41.95 yuan, down 2.78%, down more than 50% from its peak of 85.80 yuan on February 16. This also means that the market value of Haidilao has shrunk by nearly HK $200 billion in just three months.

Previously, Haidilao management disclosed that the overall turnover rate of its restaurants was lower than 3 times in April this year. Although it returned to the level of about 70% in the same period of 2019, it was lower than the 3.5-3.7 times in March, and the performance was lower than the market expectation. During the May Day holiday from May 1 to 5, Haidilao's overall turnover rate was about 4.5 to 5 times.

At present, Haidilao is in the period of rapid expansion of sinking market. Tan ye, a senior observer in the catering industry, points out that when the single store model is expanding at a high speed, there are many variables affecting the changes of the same store's revenue, turnover rate, customer price and net interest rate, which requires long-term observation. This also means that Haidilao's high-speed expansion strategy is still to be tested in time. But now, how to deal with the current valuation dilemma and continue to break through the industry and category has become the focus of market attention for this leading catering enterprise, which ranked 31st in the list of China's most admired companies by Fortune magazine in 2020 and tied with ICBC.

In addition to the impact of the epidemic, the stock price setback may also mean a rational return to Haidilao's valuation. IC photo

Reasonable callback?

Since the end of February this year, the stock of hotel catering and leisure industry in Hong Kong stock market has been in a downturn, and the leading catering companies in Hong Kong stock market have fallen sharply. In addition to Haidilao, Sipu and Xiabu also fell by more than 50% and 99.9% by more than 25%.

Affected by the epidemic situation, the business of offline stores is undoubtedly the main reason for the decline of catering companies' performance in 2020. With the disclosure of the annual report of the catering industry in 2020, during the reporting period, the operating revenue of Haidilao was HK $28.614 billion (the same as Hong Kong dollar below), with a year-on-year increase of 7.75%, and a net profit of 309 million yuan, a year-on-year decrease of 86.81%. In 2020, the average turnover rate (times / day) of the same store will decrease from 4.9 in 2019 to 4.0. Among them, the first tier cities were 3.7, with a year-on-year decrease of 24.79%; the second tier cities were 4.1, with a year-on-year decrease of 19.61%; those of the third tier cities and below were 4.3, with a year-on-year decrease of 12.24%; and those outside the mainland of China were 3.0, with a year-on-year decrease of 25%.

In the near future, according to the research report published by Morgan Stanley, the overall turnover rate of Haidilao's restaurants in April this year was lower than three times, returning to the level of nearly 70% in the same period, but lower than the 3.5-3.7 times in March, which is lower than the market expectation. The performance during the May Day holiday was also lower than the overall level in 2019.

In addition to the impact of the epidemic, the stock price setback may also mean a rational return to Haidilao's valuation. The above-mentioned senior food and beverage observers pointed out that the reasons for the decline of several leading catering enterprises are different. "The decline of Xiabu Xiabu (00520. HK) is caused by the conflict between its parent brand and its sub brands, as well as the influence of CEO turnover. Jiumaojiu (09922. HK) should belong to the normal fluctuation range, Haidilao is a reasonable regression after the stock price deviates from the average value of industry and category for a long time. "

Since its official landing in Hong Kong stock market on September 26, 2018, Haidilao began to climb gradually after setting the lowest price of 15.274 yuan on October 29, 2018, until it reached the historical highest price of 85.80 yuan on February 16 this year, with an increase of 257.58%.

Compared with the overall situation of the industry, yum China (09987. HK) can make a horizontal comparison with Haidilao in terms of competitiveness. In 2020, yum China reported that during the reporting period, the company's operating revenue was 8.263 billion US dollars, and the net profit was 784 million US dollars, up 9.96% year on year. As of December 31, 2020, it has 10506 restaurants, mainly covering more than 1500 cities in China. At the company level, it plans to expand the business map of existing cities and new cities.

As of May 20, the P / E ratio of Yum China was 27.39, with a total market value of 202.300 billion. According to Haidilao's 2020 annual report released on March 23, the global store network has increased to 1298, of which 1205 are located in the mainland of China, and 93 are located outside the mainland of China. The number of local stores is far less than that of Yum China. As of May 10, Haidilao had a P / E ratio of 605.06, with a total market value of 222.335 billion yuan.

But Haidilao's store expansion ran counter to the fall in its share price, and the company accelerated its store layout in 2020. According to the annual report, the company opened 544 Haidilao stores in 2020. Compared with the data of the previous year, the company opened 308 Haidilao stores in 2019, and 302 new stores in the global store network. Li Xiumin, an analyst with China Merchants Securities, pointed out that the accelerated expansion of Haidilao stores and the impact of the epidemic have resulted in more start-up costs and operating costs.

"The hotpot industry is the largest catering category in China, with fierce competition. The market estimates that Haidilao will reach 2500 to 3000 stores in China." Another person in the industry, according to the calculation, thinks that although the rapid occupation of the market and the formation of brand influence are the best strategies for catering enterprises to form competitive advantages, the "ceiling" of store expansion is visible.

Multiple categories promote enterprises to break through

Based on the "ceiling" of the industry, senior analysts pointed out that category innovation and promotion is another development path Haidilao seeks. Investing new products and brands in areas with growth space will help promote the long-term development of the enterprise. He added, "Haidilao has incubated more than a dozen brands in the country since last year, including porridge, dumplings, potato flour Rice noodles, pasta, etc., are concentrated in Chinese fast food, in order to expand the product line and seek new growth space. "

The diversification of categories is the strategy to deal with the saturation of hotpot market. But what strength does Haidilao have when it comes to the hot pot business?

Tan Ye thinks, "at present, Haidilao's competitiveness is mainly reflected in the following three aspects. First of all, its supply chain is very strong. Compared with other local enterprises, Haidilao's supply chain is the strongest. Among them, Shuhai has the ability to provide distribution to the whole industry, so that Haidilao has the cost advantage of supply while opening new categories. " It is reported that Shuhai company, which is controlled by Sichuan Haidilao catering Co., Ltd., began to operate independently in 2007 to provide overall supply chain custody operation services for Haidilao. It has a modern logistics center, relying on strong product research and development, procurement, production, quality assurance, storage and transportation capacity, and is a catering supply chain service enterprise integrating transportation, sales and finance.

Secondly, Haidilao has a strong organizational ability. In the process of store expansion, its service quality remains at a high level and its ability to export service talents is strong. In addition, Haidilao, as a listed company, has strong capital strength and stronger trial and error ability.

It is worth noting that Yihai International (01579. HK), the sole substrate supplier of Haidilao, which is engaged in the R & D, manufacturing, distribution and sales of composite seasonings, was listed in July 2016. Its customers include related party customers Haidilao group and its affiliated companies and third-party customers. In 2020, the operating revenue of Yihai international is 5.360 billion yuan, up 25.16% year-on-year, and the net profit is 885 million yuan, with a year-on-year increase of 23.18%. In the long run, the split listing of different businesses will become the development trend of Haidilao system, and the current brand is still in the incubation state, but this also means that Haidilao can only rely on stores to achieve development.

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