Stock Analysis & Valuation Haidilao International Holding Ltd. (6862.HK)

• Previous Close: HK$15.98
• Sector Valuation Confidence Level: Moderate

Valuation method	Value, HK$	Upside, %
Artificial intelligence (AI)	33.90	112
Intrinsic value (DCF)	7.95	-50
Graham-Dodd Method		n/a
Graham Formula	10.60	-34

Strategic Investment Analysis

Company Overview

Haidilao International Holding Ltd. is a premier global restaurant chain specializing in authentic Chinese hot pot cuisine, operating under the renowned Haidilao brand. Headquartered in Beijing, China, the company has established itself as a market leader in the experiential dining segment with 1,443 restaurants worldwide as of December 2021, including 1,329 locations across Mainland China and 114 international outlets spanning Asia-Pacific, North America, Europe, and Australia. Beyond its core restaurant operations, Haidilao diversifies its revenue streams through condiment sales, food ingredient distribution, logistics services, and culinary research and development. The company's innovative service model, characterized by exceptional customer experience and premium hot pot offerings, has revolutionized the traditional dining sector. As a dominant player in the global Chinese cuisine market, Haidilao continues to expand its international footprint while maintaining strong brand loyalty and operational excellence in the competitive consumer cyclical sector.

Investment Summary

Haidilao presents an attractive investment opportunity with strong financial metrics, including HKD 42.75 billion in revenue and HKD 4.71 billion net income, demonstrating robust profitability in the competitive restaurant industry. The company maintains a healthy balance sheet with HKD 7.47 billion in cash equivalents against HKD 6.17 billion total debt, providing financial flexibility for expansion. With a market capitalization of HKD 71.48 billion and a beta of 0.433, Haidilao offers relative stability compared to sector peers. The generous dividend of HKD 0.845 per share and strong operating cash flow of HKD 7.63 billion underscore management's commitment to shareholder returns. However, investors should monitor international expansion execution risks and potential margin pressures from rising labor and ingredient costs in the post-pandemic dining landscape.

Competitive Analysis

Haidilao's competitive advantage stems from its unparalleled service culture and premium dining experience that has become the industry benchmark. The company's signature service model, featuring complimentary amenities like manicures, shoe shines, and elaborate waiting area entertainment, creates significant barriers to entry and fosters exceptional customer loyalty. This service differentiation allows Haidilao to command premium pricing while maintaining high table turnover rates. The company's vertically integrated supply chain, including proprietary condiment manufacturing and food ingredient distribution, ensures quality control and creates additional revenue streams. Haidilao's technological innovation in ordering systems, kitchen automation, and customer relationship management further enhances operational efficiency. However, the company faces intensifying competition from both traditional hot pot chains and new market entrants adopting similar service concepts. International expansion presents both opportunities and challenges, requiring adaptation to local tastes while maintaining brand consistency. The capital-intensive nature of Haidilao's high-service model creates operational leverage risks during economic downturns, though its strong brand equity provides some pricing power resilience.

Major Competitors

• Yum China Holdings, Inc. (9922.HK): Yum China operates KFC, Pizza Hut, and other restaurant brands in China with over 10,000 locations. Its massive scale and brand recognition pose significant competition, particularly in lower-tier cities where Haidilao is expanding. However, Yum focuses on Western fast food and casual dining rather than premium Chinese cuisine, creating differentiated market positioning. Yum's stronger financial resources and established supply chain provide competitive advantages in operational efficiency.
• Xiabuxiabu Catering Management (China) Holdings Co., Ltd. (0520.HK): Xiabuxiabu is a direct competitor in the hot pot segment with a more affordable pricing strategy targeting mass-market consumers. The company operates over 1,000 restaurants primarily in China with a focus on standardized operations and cost efficiency. While lacking Haidilao's premium service experience, Xiabuxiabu's lower price points appeal to budget-conscious diners and enable faster expansion in smaller cities. Its competitive weakness lies in lower brand prestige and customer loyalty compared to Haidilao.
• Ting Hsin International Group (Ting Hsin International): This privately-held conglomerate operates the Master Kong brand and numerous restaurant chains across China, including hot pot concepts. Its extensive distribution network and food manufacturing capabilities create synergies across businesses. However, as a private company, it lacks the capital market access and transparency of publicly-traded competitors. Its diversified business model dilutes focus on restaurant operations compared to Haidilao's specialized approach.
• Yum China Holdings, Inc. (9987.HK): As the operator of Little Sheep hot pot chain (acquired in 2012), Yum China competes directly in the hot pot segment with a more standardized, franchise-oriented model. Little Sheep's Mongolian-style hot pot differentiates it from Haidilao's Sichuan-style offering, appealing to different regional preferences. Yum's operational expertise and supply chain capabilities provide competitive strengths, though the brand lacks Haidilao's premium service reputation and innovation focus.
• De Zhuang Hot Pot (Private): This growing regional competitor specializes in Taiwanese-style hot pot with a focus on soup base quality and ingredient freshness. While smaller in scale than Haidilao, De Zhuang has gained popularity in key markets through its differentiated product offering and quality positioning. The company's private status limits expansion capital compared to Haidilao, but its niche focus allows for deeper penetration in specific geographic and demographic segments.