Haidilao Latest Result: 3 Highlights That Investors Should Know

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

Last week, the food operator reported its full-year result for the year ending December 31st, 2019. Here are three important takeaways investors should know from the earnings release.

Solid financial performance

Haidilao delivered a strong performance in 2019.

Its revenue increased by 56.5% year-on-year to RMB26.6 billion. This revenue increase was driven by the company opening 308 new stores and higher same-store sales.

This strong topline growth translated nicely into Haidilao’s underlying profitability, with net profit improving by 42% year-on-year to RMB 2.3 billion.

Operational performance

In addition to its strong financial metrics, Haidilao delivered a robust performance in restaurant operational metrics.

Here are some of the highlights:

Haidilao grew its average spending per customer from RMB 101.1 to RMB 105.2, an increase of 4.1%.  This growth was driven by higher spending in its restaurants in China and was offset partially by lower spending in overseas restaurants.

It’s also worth mentioning here is that the average table turnover rate remained strong at 4.8 times in 2019, slightly lower than 5.0 times in 2018. Excluding newly open stores (which tend to have lower table turnover), average table turnover for existing stores stood at 5.2 times, unchanged from last year.

In the future, Haidilao’s “new technology restaurants” will likely improve its operational efficiency. These restaurants have features like robotic arms that automate serving, intelligent soup base preparation machines, robot waiters, and more.

Strong balance sheet

Despite the costs associated with opening new restaurants, Haidilao was able to maintain a healthy balance sheet thanks to the performance of existing restaurants.  As of December 31st, 2019, cash and cash equivalents and borrowings were worth RMB 2.2 billion and RMB 122.2 million, respectively.

There are numerous benefits to this balance sheet.

For starters,  Haidilao will have the staying power to weather the challenging market environment produced by the COVID-19 virus outbreak. Past that, the company will be able to execute on its restaurant expansion plans, presumably after the virus outbreak has receded.

Foolish takeaway

Haidilao ended 2019 with strong performances across the board.

Going forward, investors should expect less visibility regarding the company’s 2020 performance, considering the recent virus outbreak.

Still, Haidilao is well-positioned to outperform in the long run. It continues to delight its old customers, as well as acquiring new ones through restaurant expansions. 

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