Before mid-February this year, investors in Haidilao (06862) were still immersed in the excitement of the stock price hitting new highs. Probably not many people would have expected that Haidilao’s share price would drop below 80 Hong Kong dollars in just four months. , 70 Hong Kong dollars, 60 Hong Kong dollars, 50 Hong Kong dollars, 40 Hong Kong dollars in integer mark.
Quote source: Zhitong Finance APP
From being “the star holding the moon” by investors to “abandoning it like a shoe”, Zhang Yong, the head of the company, also lost “Singapore’s richest man” in the process. We cannot help asking, what has happened to Haidilao in the past 120 days? With the stock price falling, has the company’s investment logic changed?
Performance has stalled, and the rate of overturning has plummeted
In the past period of time, Haidilao is not the “lone case” of the bad stock price trend in restaurant stocks. The company’s upstream supplier Yihai International (01579) has also experienced the same drastic stock price adjustment. Calculated based on the closing price on June 22, Yihai International’s current share price is 148.297 Hong Kong dollars from the year’s high, a drop of more than 60%.
In the same period, Xiabuxiabu (00520), Jiumaojiu (09922) and other stocks have also experienced significant retracements.
Zhitong Finance APP believes that, regardless of external factors, the direct “fuse” of Haidilao’s constant decline may be the two bad news that came out in the past four months. First, the company issued a profit warning on March 1. The company expects that its net profit in 2020 will drop by about 90% year-on-year. The warning was subsequently confirmed in the annual report released in late March, and the company’s net profit decreased by about 86.8% under the background of steady and rising revenue.
Second, in early May, Morgan Stanley released a research report, which quoted information from Haidilao’s management. In April this year, the overall turnover rate of the company’s restaurants was less than 3 times, which was only about 70% of the same period in 2019, compared with March. The 3.5-3.7 times of Haidilao also declined, and the performance was significantly lower than market expectations. During the May 1st holiday this year, Haidilao’s overall turnover rate was about 4.5-5 times, which was only about 70%-75% of the same period in 2019. .
Looking back on historical operating data, in the long years before the epidemic hit, Haidilao has always shown itself as a high-growth Big White Horse stock.
Public data shows that from 2016 to 2019, Haidilao’s revenue was 7.808 billion yuan (RMB, the same below), 10.637 billion yuan, 16.969 billion yuan, and 26.556 billion yuan, corresponding to growth rates of 35.63%, 36.24%, and 59.53. %, 56.49%; net profit attributable to the parent is 735 million yuan, 1.028 billion yuan, 1.646 billion yuan, and 2.345 billion yuan, corresponding to growth rates of 169.6%, 39.81%, 60.16%, and 42.44%.
The sudden epidemic interrupted the growth momentum of Haidilao. In 2020, the company’s revenue was 28.614 billion yuan, the growth rate dropped to the lowest in the past five years, only 7.75%; the net profit attributable to the parent was 309 million yuan, and the profit scale was a record in the past five years. lowest.
In addition to the profit data of “Waterloo”, the deterioration of Haidilao’s overturning rate is also worthy of investors’ attention. Earlier, a brokerage firm made an estimate of the company’s restaurant profitability based on Haidilao’s turnover rate. The data shows that the three-time turnover rate is already the break-even line of Haidilao’s single store, and the overall turnover rate of the company’s restaurants in April this year has been lower than this value, which means that most of the company’s stores are in a state of meager profit or even loss. Even during the May Day holiday with hot travel data, the overall turnover rate of Haidilao’s restaurants was only 4.5-5 times.
The decline in Haidilao’s overturning rate is actually not surprising. Based on the data of the last six years, the turnover rate of Haidilao restaurant reached its peak in 2018, and then it entered the downward channel.
The company’s restaurant turnover rate continues to drop, directly due to the company’s aggressive expansion of the number of stores in recent years. The data shows that between 2015 and 2020, the number of restaurants under the company has increased from 146 to 1,298. Among them, the number of newly opened stores in 2020 will reach 544. Assuming that Haidilao continues to maintain the current store expansion rate, the new store will inevitably have a diversion effect on the original store, and a further decline in the turnover rate may be inevitable.
The logic of growth or has changed
For Haidilao, there seems to be a sense of “success and failure to open a shop”. In the past, Haidilao’s performance growth mainly relied on store expansion. But now, opening a store too quickly has not had a positive effect on the company’s profitability, but has suppressed the restaurant’s turnover rate.
On the other hand, perhaps for the purpose of making up the profit gap, Haidilao adopted a price increase strategy in 2020 to try to improve profitability. The financial report shows that in 2020, the per capita consumption of the company’s customers has risen from 105.2 yuan to 110.1 yuan, and this move has also attracted many negative comments.
“You can’t admonish the past, but you can chase after you come.” Investors “vote with their feet” may indicate that investors have a low degree of matching the company’s performance and operating conditions with current stock prices and valuations. Looking to the future, what is the growth logic of Haidilao next?
According to the research report of Guosen Securities, the company’s future growth mainly depends on two aspects. First, the future chain expansion space of Haidilao restaurants; second, the company relies on its strong supply chain platform system and excellent amoeba management system, and will continue to expand its potential for new brands, mergers and acquisitions in the future, relying on its strong supply chain platform system and excellent amoeba management system , That is, the growth of the catering business from a single brand to diversification.
Regarding the first point, data from the Head Leopard Research Institute shows that by 2025, Haidilao’s Chinese stores will have approximately 2,500 expandable space. As of the end of 2020, the company has 1,205 domestic stores, which means that under the circumstance that everything goes well, the expandable number of company stores will more than double in the next three years.
According to the calculation data of Guosen Securities, with the expansion of the company’s stores in the future, as long as its turnover rate can be more than 3.5 times, the company’s overall profitability will still be well supported. The subtext of the analyst’s view is undoubtedly that if the turnover rate remains below the level of 3 times in April this year, Haidilao, which has opened a store crazy, may encounter the embarrassment of “increasing revenue but not profit”. Based on this, if the company cannot find a balance between store expansion and decline in turnover rate, the company’s first growth logic may appear very fragile.
In terms of advancing its diversified layout, Haidilao’s “ideal” is full, while the reality is rather cruel. According to a report issued by the Head Leopard Research Institute, Haidilao is currently actively deploying fast food, dinner, casual dining, and hot pot takeaway businesses.
It is understood that Haidilao has developed more than ten fast food brands, and its core products cover three categories: covered noodles, rice bowls and maocai. However, the business is still in the process of exploring business models, and the operating logic of fast food and hot pot is different, so it is quite a test of Haidilao’s operational capabilities. In areas such as dinner and casual dining, Haidilao is actively trying to extend its acquisitions to expand its business boundaries.
Although it is attacking everywhere, it seems that it is not easy for Haidilao to build a second growth curve. In 2020, the company’s revenue from restaurants and food delivery services other than Haidilao will total less than 3%, which is really insignificant compared to its main business.
The chain reaction after the stock price has shrunk
Judging from the laws of history, the capital market is often “icing on the cake”, but it rarely “sends charcoal in the snow.” When the company’s growth logic is recognized by everyone, even neutral events may be regarded as positive, and the stock price will continue to rise; and once the growth logic changes, even if it is favorable, it may be ignored, and the downward trend of the stock price is difficult. Reverse in a short time.
A series of chain reactions are also fermenting after the five consecutive negatives on the monthly bar of the stock price. For example, with the listing of Haidilao, Zhang Yong, who has reached the position of “Singapore’s richest man” with its share price hitting record highs, has now surrendered the position of the richest man because of the “shrinking” of the company’s share price.
Another example is that Haidilao’s share price and valuation are “double kills,” and market pessimism has also been transmitted to the company’s upstream supplier, Yihai International. Although Yihai International has deliberately “de-haidilao” in recent years, the company’s revenue from Haidilao has been declining year by year, but in 2020 there will still be nearly 30%.
From 2018 to 2020, Yihai International’s share price increase (pre-reversion) was 173.3%, 145%, and 153.92%, respectively. In terms of stock price performance, it is even better than Haidilao. However, as Haidilao’s growth logic is no longer “stable”, Yihai International, which is a related party and has a high valuation, cannot stand alone.
Looking back at Haidilao, as of the time of writing, the company’s price-to-book ratio was 16.36 times, and its dynamic price-earnings ratio was 541.33 times. Although it is an excellent company, its valuation is hard to say cheap. In addition, compared with the high valuation, whether the company can return to the growth rate before the epidemic may be an issue that investors are more concerned about.
article links：The double kill of stock price and valuation Haidilao
Reprint indicated source：Shine Trader Limited Live information