Haidilao’s First-Half Results: Net Loss Amid Lower Revenue

Hot pot chain Haidilao International Holding Ltd (SEHK: 6862) reported weaker numbers amid the Covid-19 outbreak. Here’s what investors need to know. – Haidilao hotpot

Haidilao International Holding Ltd (SEHK: 6862) operates a hot pot restaurant chain in China and overseas markets.

On Tuesday, the food operator reported its first-half results for the year ending 31 December 2020. Here are three takeaways that investors should know about from its earnings release.

Overall financial performance

For the first half of 2020, Haidilao reported that revenue declined by 16.5% year-on-year to RMB 9.8 billion (US$1.42 billion) amid the lockdown in China between the end of January and early March.

It has reopened most of its restaurants suspended in mainland China since 12 March, 2020.

Despite the impact of the Covid-19 outbreak, Haidilao remained active in opening new restaurants, with 173 new restaurants opened during the first half of 2020.

Moreover, the revenue for the food delivery business more than doubled from RMB 183 million to RMB 410 million as the company sold more products online during the pandemic period.

The lower revenue, as well as ongoing expansion of new restaurants, resulted in a net loss of RMB 965 million for the first half of 2020. Net profit was RMB 912 million in the same period last year.

Operational performance

In addition to its financial metrics, investors should also pay attention to Haidilao’s operational metrics. Here are some of the highlights.

To start with, it grew its average spending per customer from RMB 104.4 to RMB 112.8, up by 8.0%. The increase was driven by higher spending in its restaurants, both in China and overseas.

Despite its higher average spending per customer, the average table turnover rate per day plunged by 31% year-on-year from 4.8 times to 3.3 times amid the impact of the virus.

The lower table turnover rate adversely impacted the average same-store sales per day, which fell by 21% year-over-year to RMB 98,100.

To improve efficiency and customer service, Haidilao continued its investments in new technology during this period, which included robotic arm automatic serving, intelligent soup base preparation machines, robot waiters, and more.

These initiatives will aid the company’s efforts to survive in these challenging times, as well as position itself to grow over the medium to long term.

Financial position

Historically, Haidilao has kept its balance sheet strong with plenty of cash and little debt.

In the first half of 2020, the food operator increased its bank borrowings to RMB 3.3 billion due to business expansion and the pandemic.

Still, it has RMB 2.2 billion in cash and cash equivalents, giving it a net debt of RMB 1.1 billion. With equity of about RMB 8.9 billion, the gearing ratio remained low at around 12%.

With its low gearing, Haidilao will have the staying power to weather through the present challenging environment caused by the Covid-19 outbreak.

Foolish takeaway

Overall, Haidilao’s performance came in weaker as a result of the Covid-19 pandemic.

Still, Haidilao is positioning itself for long-term performance via its efforts to improve online sales, open new restaurants, and invest in technology.

More reading

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hongkong contributor Lawrence Nga doesn’t own shares in any companies mentioned.

The Motley Fool Hong Kong Limited( 2020

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