Hotpot chain Haidilao surged in Hong Kong, banks raised target prices after positive H1 profit forecast

 

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Haidilao International, the largest hotpot restaurant chain in China, surged 4.88% to close at HK$22.5 in Hong Kong. 

Haidilao has recently said that it’s expected to post a net profit of no less than 2.2 billion yuan for the first half of the year, surging from 72 million yuan a year earlier, and its revenue will be no less than 18.8 billion yuan, rising by at least 23.7% from a year ago. Its net profit margin is expected to reach 11.7%, rising by 11.2 percentage points from a year ago and higher than the 10.3% in 2019. 

UBS expects Haidilao’s net profit margin to have recovered to a healthy double-digit level and the company will likely increase penetration in lower-tier cities with smaller restaurants. The bank raised the target price to HK$27.8 from Hk$18.5 and upgraded its rating to Buy from Neutral.

UOB-Kay Hian raised the target price for Haidilao to HK$26 from HK$23, with its rating upgraded to Buy. Given the company’s profit warning for the first half and Chinese authorities’ efforts to boost domestic demand, market sentiment has improved, the broker said.

Haidilao’s first-half net profit margin of 11.7% is higher than market consensus of 7.5% for the full year of 2023, it said. 

Haidilao’s same-store table turnover rate in January reached 100% of the level in the same period in 2022 and in April, the rate rose to more than 140% of 2022-level and in June, the rate reached 120% of a year ago, Guosen Securities said in a note.

If Haidilao resumes the momentum in new store opening on top of the recovery of the table turnover rate, its valuation is expected to rebound and the rating is maintained at Buy, Guosen said.