Haidilao International Shares Jump on Surprise Profit Guidance

Haidilao International Shares Jump on Surprise Profit Guidance

Shares of Chinese restaurant chain Haidilao International Holding Ltd. rose sharply Monday after the company guided for a 2022 profit.

The hotpot-restaurant chain’s shares jumped as much as 18% to 22.70 Hong Kong dollars (US$2.89) in early trade, after Haidilao said it expects to be profitable for 2022 despite the impact of Covid-19 lockdowns in China. Shares were last 17% higher at HK$22.45.

In a stock exchange release late Friday, Haidilao said it expected to swing to net profit of at least 1.30 billion Chinese yuan (US$186.9 million), even though revenue is expected to decline by around 16%.

The restaurant chain’s improved earnings was mostly due to Haidilao’s efforts to streamline its operations, as well as a gain of around CNY329 million after the company’s repurchase of corporate bonds due in 2026, Haidilao said.

Haidilao recording net profit of CNY1.30 billion exceeded market expectations, Citi analysts Xiaopo Wei and Vincent Yang said in a research report.

“Even if stripping out one-off gains on [Haidilao’s] repurchased notes, its core net profit of around CNY1.0 billion in 2022 was still significantly above our and market expectations,” the analysts added.

The restaurant chain also seems well-positioned to benefit this year from China’s reopening, as table turnover is expected to improve sequentially from January, Citi said.

The Citi analysts have a buy rating and target price of HK$27.30 on Haidilao’s stock. Citi has Haidilao as one of its top picks in the Chinese consumer sector.

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