Intrinsic Value Haidilao International Holding Ltd. (6862.HK)

• Previous Close: HK$15.98
• Intrinsic Value: HK$7.95
• Upside potential: -50%

Stock Valuation Context

Business Model And Market Position

Haidilao International Holding Ltd. is a globally recognized premium hot pot restaurant chain, operating primarily under its flagship Haidilao brand. The company's core revenue model is direct-to-consumer, generated from its extensive network of company-owned and operated restaurants that offer a distinctive dining experience centered on Chinese hot pot cuisine. It operates in the highly competitive consumer cyclical sector, specifically within the full-service restaurant industry, where it has carved out a defensible niche through its focus on exceptional service, high-quality ingredients, and a standardized yet customizable offering. Its market position is that of a category leader and innovator, renowned for pioneering value-added services that enhance the core dining experience, which has allowed it to command premium pricing and foster strong brand loyalty. With a significant presence across Mainland China and a growing international footprint, Haidilao leverages its scale in supply chain management and a proven operational playbook to maintain consistency and efficiency across its vast network of over 1,400 locations, solidifying its status as a dominant player in the global experiential dining landscape.

Revenue Profitability And Efficiency

For the fiscal year, the company reported robust revenue of HKD 42.8 billion, demonstrating strong top-line performance from its restaurant operations. Net income reached HKD 4.7 billion, reflecting healthy conversion of sales to profit and effective cost management. The business generated substantial operating cash flow of HKD 7.6 billion, indicating high operational efficiency and a strong ability to convert earnings into cash.

Earnings Power And Capital Efficiency

The company exhibits solid earnings power, with diluted earnings per share of HKD 0.87. Its capital structure appears efficient, as the business model does not appear to be heavily reliant on significant capital expenditures for growth, as indicated by the reported figure. This suggests a capital-light expansion strategy focused on operational leverage and brand scalability.

Balance Sheet And Financial Health

Haidilao maintains a strong financial position with a substantial cash and equivalents balance of HKD 7.5 billion. Total debt is reported at HKD 6.2 billion, resulting in a conservative net cash position. This provides significant liquidity and financial flexibility to navigate market cycles and pursue strategic opportunities without undue leverage risk.

Growth Trends And Dividend Policy

The company has demonstrated a commitment to returning capital to shareholders, evidenced by a dividend per share of HKD 0.845. This payout, against the earnings per share, indicates a shareholder-friendly distribution policy. The growth trajectory is supported by its extensive store network and potential for both domestic market penetration and international expansion.

Valuation And Market Expectations

With a market capitalization of approximately HKD 71.5 billion, the market values the company's premium brand and scalable business model. A beta of 0.433 suggests the stock is perceived as less volatile than the broader market, potentially reflecting its established market position and resilient demand for its experiential dining offerings.

Strategic Advantages And Outlook

Haidilao's key strategic advantages lie in its powerful brand equity, standardized high-quality service, and innovative dining experience, which are difficult for competitors to replicate. The outlook remains positive, supported by its strong balance sheet, operational cash flow generation, and a clear pathway for measured growth in both existing and new markets, leveraging its proven operational excellence.

Sources

Company Annual ReportHong Kong Stock Exchange Filings