"What has not been done well in recent years, shareholders have a lot of responsibility, we will know what is not doing well, and we will redouble our efforts to adjust." Please trust me, as long as you give me time, I can do it." On June 7, at the annual general meeting of shareholders of Haidilao International Holdings Co., Ltd., Chairman Daniel Zhang sincerely and firmly expressed the above confidence in answering investors' questions. This may mean that Haidilao is standing at a critical juncture of qualitative change.
Daniel Zhang confidence stems from a simple underlying logic, which is that eating is just a need. He said that whether the economy is up or down, catering has opportunities, which is the most important reason why he likes the catering industry.
Standing at the current point, economic recovery and consumption recovery are the general trend. In particular, the recovery of social scenes has created new market opportunities for Haidilao, which provides products and services that are just in demand. If you use numbers to represent the short-term potential opportunities of hot pot catering, the answer will be 60 billion.
According to Li Peng, financial director of Haidilao, in the past, the growth rate of catering in China as a whole was about twice the growth rate of China's GDP. According to the International Monetary Fund, China's GDP growth rate will basically exceed 5% in 2023. According to the forecast of the China Catering Association, in 2022, the share of hot pot in the catering market is about 600 billion.
In the face of huge market incremental space, Haidilao is ready to dig.
Haidilao is ready
In the past two years, Haidilao has made two impressive changes, the first being the "Woodpecker Program" led by Haidilao CEO Yang Lijuan in November 2021. The second time was in September 2022, when Haidilao launched the "Hard Bones" store plan.
In the "Woodpecker Plan", Haidilao has continuously polished the store management system, continuously optimized the store operation and management level, and clarified the work content, work objectives, assessment standards and reward and punishment mechanisms at each level. The "Hard Bones" store plan is that the company is considering reopening some of the stores closed by the "Woodpecker Plan".
From the "Woodpecker Plan" to the "Hard Bones" Store Plan, it is the process of Haidilao's basic skills of cultivation management and actively embracing market opportunities. As Zhou Zhaocheng, non-executive director of Haidilao, said, he has learned a lot in the past three years, including operation, management, cost control, and optimization of store location.
Because it has learned a lot of experience and lessons in the past, Haidilao's future store opening strategy will be more cautious. An important principle of Haidilao's store opening strategy is the "bottom-up" store expansion strategy, that is, the front-line store manager and regional manager "bottom-up" submit the store expansion plan, because the front-line manager has a better understanding and familiarity with the market, the region and consumers, and then the company will evaluate it according to resources and comprehensive evaluation.
At the same time, Haidilao is also optimistic about future store expansion. The reason is that the company has enough back-up store managers to manage the stores. In addition, the company has sufficient self-financing, cash flow and bank capital support. These two important resources make the company more flexible and have more room to look at future growth opportunities.
The operating data does not lie, just over a month ago, on March 30, Haidilao, which suffered the violent impact of the epidemic in 2022, handed over a performance answer sheet that has recovered sharply. Data show that in 2022, Haidilao's revenue from continuing operations will be about 31.039 billion yuan, and the profit from continuing operations will be about 1.637 billion yuan, compared with the loss of about 3.248 billion yuan in the previous year, achieving a turnaround.
Of course, this is also thanks to the fact that in the ups and downs of the business environment, Haidilao has also retained a solid business "basic plate". As of 2022, the company has a total of 1,349 Haidilao restaurants in Chinese mainland and 22 in Hong Kong, Macao and Taiwan, making it a "leader" in Chinese catering.
The above data is enough to show that Haidilao, which has been operating for 29 years, is still an evergreen brand in the catering industry. In Haidilao's business philosophy, there is no special mystery about how to keep the company evergreen, or how to maintain the attractiveness and freshness to customers. In the words of Haidilao Zhou Zhaocheng, Haidilao has always implemented the pursuit of "employee effort and customer satisfaction" from the beginning of its establishment to the present, two important dimensions, one is reflected in internal management, and the other is reflected in customer service and demand satisfaction.
Zhou Zhaocheng believes that the catering industry is a very fragmented industry and is unlikely to form a high degree of monopoly. Catering enterprises must always face changing consumers, face changes in the demand of the catering industry, and face the new consumption methods, tastes, new experiences, etc. expected by consumers, so the catering industry has always maintained such pressure, and Haidilao has always carried out in-depth market insights to keep up with changes in consumer demand.
In order to enhance customer satisfaction, Haidilao focuses on innovative dishes and high-quality service improvement. In terms of products, in 2022, Haidilao organized a total of 3 national product launches, 12 explosive new products and 16 deeply optimized old products. In order to meet the differentiated needs of customers in different regions, the company also launched regional products, with a total of 127 regional new products that have been launched for three months. During the May Day holiday in 2023, Haidilao's nine new spring and summer products sold more than 1.27 million copies three days before the May Day holiday.
Data shows that during the Spring Festival in 2023, Haidilao restaurants received more than 6.5 million customers in the five days from January 23 to 27. On Valentine's Day on February 14, Haidilao's stores nationwide received more than 1.4 million people, a year-on-year increase of more than 25%, and the number of delivery orders on the same day increased by 2.1 times year-on-year. In the three days before the May Day holiday, Haidilao's stores nationwide received nearly 5.3 million customers, a year-on-year increase of about 65%. On May 20, the number of visitors exceeded 1.66 million.
Long-term growth is optimistic by brokers
There is reason to believe that in an all-round good business environment, Haidilao is ready to meet new opportunities and challenges, and the company's long-term growth has also been favored by many brokers.
Zhitong Financial App noted that Huatai Securities said in a research report released on June 8 that Haidilao's operational reform has achieved certain results, and the store turnover has stabilized since 2023. The third quarter of 2023 will enter the hot pot consumption season, which is expected to continue to drive the company's performance to recover, and the pace of store opening throughout the year may remain steady.
Based on the long-term, the brand influence of Haidilao is still there, reserve store staff and funds are sufficient, if the internal adjustment of the organization is completed, the subsequent expansion can be accelerated, optimistic about the company's long-term development momentum. Huatai Securities maintained Haidilao's "Overweight" rating with a target price of HK$22.76.
Southwest Securities also believes that Haidilao is the leader of the hot pot chain of restaurants, and in the future, with the recovery of consumption and the continuous realization of cost reduction and efficiency increase, the company will have greater resilience on the profit side. EPS is expected to be $0.56/$0.83/$1.04 for 2023-2025, with a "buy" rating and a target price of HK$22.38.
Haitong International said in the research report that in 2023, Haidilao will promote the two plans of "Woodpecker" and "Hard Bones" in parallel on the basis of taking into account the external environment and internal management, optimistic about the company's store-end repair and optimization capabilities and the recovery of the rhythm of store expansion after the epidemic.
In view of the company's net profit attributable to the parent in 2022, Haitong International has made adjustments to future revenue, net profit and EPS. It is expected that the revenue in 2023-25 will be 439.27, 524.14 and 58.883 billion yuan, respectively, an increase of 41.5%, 19.3% and 12.3% year-on-year, and the net profit attributable to the parent will be 34.47, 47.00 and 5.657 billion yuan, respectively. Based on 40 times PE and 18 times EV/EBITDA in 2023), corresponding to HK$28.2 per share, maintaining the "outperform" rating.
"Since I founded Haidilao, I have adhered to the value of 'changing destiny with both hands'." Daniel Zhang's words at the shareholders' meeting explain why Haidilao has been recognized by consumers in the Chinese catering market, why it has long held the crown of "leader" in the market segment, and why it has continued to be recognized by the capital market.
In the view of Zhitong Financial App, no matter what business you do, no matter what kind of efforts the company makes, hard work will always win people's hearts. In the future, time will give the answer to what kind of performance Haidilao will deliver, but one thing is clear, the hot pot king who has fully honed the basic skills of operation in the three years of the epidemic will continue to evolve.