Haidilao Daniel Zhang and his wife promoted a new IPO, and their wealth shrank by 22 billion a year

Produced by Radar Finance and Economics, edited by Xiao Sa, Deep Sea

Daniel Zhang, who once topped Singapore's richest man, continued to expand his restaurant territory.

On May 13, Haidilao announced with the U.S. Securities and Exchange Commission that Haidilao's overseas business, Tehai International Holdings Co., Ltd. (hereinafter referred to as "Tehai International"), will be listed on the NASDAQ stock market in the U.S. under the symbol "HDL".

Tehai International is mainly responsible for Haidilao's restaurant business outside Greater China (including Chinese mainland, Hong Kong, Macau and Taiwan), which was previously listed on the Hong Kong Stock Exchange in December 2022, with a total market value of over HK$10 billion.

Daniel Zhang, born in Jianyang, Sichuan Province in 1971, graduated from a technical school in Jianyang at the age of 17 and began to break into society. In 1994, he decided to open a hot pot restaurant with his friends, and the first "Haidilao" was born. In the past 30 years, Haidilao has become the leading hot pot brand in China with its unique service.

Since 2016, Daniel Zhang and Shu Ping's Yihai International, Haidilao and Tehai International have been listed in Hong Kong. In 2019, Daniel Zhang and his wife became the richest people in Singapore by Forbes Asia, worth about US$13.8 billion (about 98.7 billion yuan at the exchange rate at the time). However, since then, with the fluctuation of Haidilao's performance, the wealth of the Daniel Zhang family has also shrunk significantly, and the wealth of Daniel Zhang and his wife in the 2024 Hurun Global Rich List is about 53 billion yuan, a decrease of 22 billion yuan compared with a year ago.

Haidilao's overseas business went public in the United States

On May 13, Haidilao disclosed with the U.S. Securities and Exchange Commission (SEC) that Haidilao's overseas business, Tehai International, will issue 2,692,700 American Depositary Shares (ADS), which is expected to be traded on the NASDAQ stock market under the symbol "HDL".

Upon completion of the Offering, the entities controlled by Daniel Zhang will collectively own 45.66% of the issued shares of the Company, assuming that the underwriters do not exercise the option to purchase additional ADSs. At the same time, Daniel Zhang's spouse Shu Ping is the director and chairman of Tehai International.

In 2012, Haidilao began its global market layout and opened its first overseas restaurant in Singapore. Since then, it has gradually opened in North America, East Asia, Europe, Australia and other regions.

At the end of 2022, Haidilao decided to spin off its overseas business, namely Tehai International, and list it separately. At the end of the year, Tehai International was listed on the Hong Kong Stock Exchange by way of introduction. It is reported that in this way of listing, the listing of Tehai International does not issue new shares and does not involve financing.

According to the announcement, as of December 31, 2023, Tehai International has expanded to 115 self-operated restaurants in 12 countries on four continents, of which 70 are located in Southeast Asia, 17 are located in East Asia, 18 are located in North America, and 10 are located in other regions (including Australia, the United Kingdom and the United Arab Emirates).

As for the reasons for promoting dual listing, Tehai International said that this move is conducive to expanding its shareholder base, obtaining additional capital, enhancing its corporate image and influence in the international capital market and consumer market, and further strengthening the liquidity of shares.

According to the latest disclosure, on May 13, the closing price of Tehai International's ordinary shares on the Hong Kong Stock Exchange was HK$16.68 per share, and the proposed price per ADS was US$21.35, with an estimated net proceeds of approximately US$48.8 million. If the underwriters exercise the option to purchase the additional ADS in full, it would be approximately $56.82 million.

After deducting underwriting commissions and issuance expenses, about 70% of the funds raised will be used to strengthen the brand and expand the restaurant network globally, and the rest will be used to improve supply chain management capabilities, research and development, working capital and other general corporate purposes.

In terms of performance, Tehai International did not turn a profit until last year. According to the data, the revenue of Tehai International from 2019 to 2022 was about US$233 million, US$221 million, US$312 million and US$558 million respectively, and the losses attributable to the company's owners during the year were US$33.02 million, US$53.76 million, US$151 million and US$41.248 million.

In 2023, Tehai International's revenue increased by 22.94% year-on-year to US$668 million, and the profit attributable to the company's owners during the year increased by 162.19% year-on-year to US$25.653 million.

As for the reasons for the turnaround, Tehai International said that the first is the increase in the average turnover rate of each restaurant, and the second is the improvement of internal management and operation, which optimizes the costs and expenses related to the operating efficiency of the restaurant.

Correspondingly, the company's turnover rate improved from 2.1 times per day in 2021 to 3.3 times per day in 2022 and further improved to 3.5 times per day in 2023, and the average daily revenue per restaurant increased from $1,000 in 2021 to $15,400 in 2022 and further to $16,300 in 2023.

However, entering the first quarter of 2024, Tehai International fell into a loss again. According to the unaudited financial information released by the Company for the three months ended March 31, 2024, the total revenue achieved in the first quarter of 2024 was US$187.6 million, a year-on-year increase of 16.6%, mainly due to the growth of Haidilao's restaurant business revenue.

During the same period, the Company recorded a net loss of US$4.5 million, compared to a net profit of US$5.6 million for the same period in 2023, mainly due to a net foreign exchange loss of US$13 million for the quarter.

However, Tehai International's operating performance continued to improve. In the first quarter of 2024, compared with the same period last year, the total number of visits to the company increased from 6 million to 7.3 million; The turnover rate increased from 3.3 to 3.9 per day, the average daily revenue per restaurant increased from $15,900 to $17,500, and the average spend per guest decreased from $26 to $24.9.

The history of the "hot pot brother" Daniel Zhang

At present, Daniel Zhang and his wife have three Hong Kong-listed companies, Haidilao, Yihai International and Tehai International, with a total market value of more than 100 billion Hong Kong dollars. If Tehai International successfully lands on the NASDAQ, Daniel Zhang will usher in a fourth IPO.

As the undisputed winner in the restaurant industry, how did Daniel Zhang make his fortune from an ordinary hot pot business? According to public information, Haidilao Daniel Zhang was born in 1970 and is a native of Jianyang, Sichuan.

In 1988, 18-year-old Daniel Zhang graduated from secondary school, and many people at this age have just been admitted to university. Then he entered the Sichuan Tractor Factory where his father worked as a chef as a welder, which was 6 years.

But Daniel Zhang was not willing to take only 93.5 yuan a month, and he began to learn from the people around him to go to the sea to do business. In the course of a few years, he tinkered with poker machines and sold gasoline, all of which failed.

In 1994, Daniel Zhang set up four tables in his hometown of Jianyang, Sichuan, and sold spicy hot in his spare time. After in-depth and careful market research and analysis, Daniel Zhang and his girlfriend Shu Ping, as well as Shi Yonghong and girlfriend Li Haiyan, the four of them pooled 8,000 yuan, played four hot pot tables, and the first "Haidilao Hot Pot" officially opened.

Since then, it is well known that Daniel Zhang has successfully developed Haidilao from an ordinary hot pot restaurant to a world-renowned catering brand through his keen business sense and unique business thinking.

It is reported that at the beginning of the opening, Daniel Zhang's goal was no longer in Sichuan, but set his sights on the whole country. After that, he continued to learn from large domestic catering companies, and delved into Haidilao's unique service system.

Daniel Zhang also advocates family-style management, and he once said that he has been pondering what the core competitiveness of the catering industry is, is the environment, taste, food safety? Or the quality of service? In the end, I found that it was neither, "I think that if the human resources system is built well, it may become the core competitiveness of Haidilao in the future." ”

In addition, under the leadership of Daniel Zhang, Haidilao successfully broke through the ceiling of the family business. In 2004, Daniel Zhang proposed to let his wife Shu Ping and Shi Yonghong's wife Li Haiyan leave the company and only become shareholders.

Daniel Zhang then let Shi Yonghong leave Haidilao in 2007 and bought an 18% stake from Shi Yonghong and his wife at the original capital contribution. In 2007, Daniel Zhang and his wife became 68% absolute controlling shareholders of Haidilao.

In September 2018, Haidilao was listed in Hong Kong, China, and its market value exceeded 100 billion Hong Kong dollars on the first day, which also made Daniel Zhang one of the richest people. In less than a year, Haidilao's market value approached the HK$200 billion mark, and Daniel Zhang successfully became the richest man in Singapore.

At present, in addition to the listed Haidilao and Tehai International, Daniel Zhang and his wife also own the equity of another listed company, namely Yihai International, which landed in the capital market as early as 2016.

Yihai International is a base material supplier of Haidilao, formerly known as Haidilao Chengdu Branch. As of the end of 2023, Daniel Zhang and Shuping jointly hold 31.44% of the shares of Yihai International.

However, due to the decline of Haidilao's stock price, in terms of personal wealth, the current net worth of Daniel Zhang and his wife has shrunk significantly from their peak. According to the Hurun Global Rich List, in 2023 and 2024, the wealth of Daniel Zhang and Shu Ping will be 75 billion yuan and 53 billion yuan respectively, according to which the wealth of Daniel Zhang and his wife will shrink by 22 billion yuan a year.

Competition in the hot pot track intensifies

The development of Haidilao has not been smooth sailing. In particular, the contrarian expansion during the epidemic brought the company into a loss-making situation.

Past financial reports show that at the end of 2017, Haidilao only had 273 stores, and in 2018, nearly 200 new stores were opened in the year of listing, and the number of stores worldwide reached 466. In 2019, 308 new stores were opened, and in 2020, the number of stores continued to expand by 544 in the face of the abusive epidemic.

In 2021, 421 new Haidilao restaurants were opened, while 276 were closed. It was also this year that Haidilao ushered in its first loss after listing, with a loss of 4.16 billion yuan, of which a one-time loss of more than 3.65 billion yuan was provided for due to the disposal of long-term assets due to the closure plan.

On the eve of the disclosure of this huge loss, Daniel Zhang retreated bravely and handed over the position of CEO of Haidilao to Yang Lijuan, known as the "best waiter". Daniel Zhang once reflected, "In the past few years of the epidemic, I have always failed to make decisions, I think it should be opened and the results are closed, I think it should be closed and the results are released, and every time I step on the bias." ”

Entering 2022, with the recovery of the entire catering industry, Haidilao has returned to profitability. Flush iFinD data shows that in 2022, Haidilao will achieve a revenue of about 34.741 billion yuan and a net profit of about 1.373 billion yuan.

According to the 2023 performance announcement, Haidilao's annual operating income was 41.453 billion yuan, a year-on-year increase of 33.6%; The profit attributable to the owners of the company was 4.499 billion yuan, a year-on-year increase of about 227.33%.

It is worth noting that with the improvement of performance, on March 4 this year, the Haidilao brand announced a large-scale opening of franchise licenses for the first time since its establishment. At present, Haidilao has established a franchise division, and the minimum capital threshold for joining Haidilao exceeds 10 million yuan.

Some industry insiders pointed out that the current catering market is picking up strongly, and the trend of opening up and joining of leading catering companies is becoming more and more obvious, and many brands choose to open up and join to expand the market, which leads to more fierce competition in the hot pot track.

In January 2024, Jiumaojiu Group announced that from February 1, it will gradually open up the franchise and cooperation business of its Taier sauerkraut fish and Shandi sour soup hot pot. On March 8, Sister Pei's old hot pot also said that it was looking for a city partner and officially opened the franchise.

In the view of Liu Yuan, the founder of Dalongyi hot pot, the competition in the hot pot market has indeed become more intense, with a large number of entrepreneurs pouring into the market and a large number of new hot pot restaurants appearing, which has formed a terrible "door-to-door competition". He said that the hot pot market will inevitably usher in a major reshuffle in the future, and survival of the fittest will become the norm.

In this case, Haidilao, as the industry leader, will naturally increase significantly with the influx of a large number of new brands and the expansion of market share with existing brands through franchises.