Mar 14, 2020 (China Knowledge) - China’s Sichuan-style hotpot chain restaurants Haidilao Intn’l Holding Ltd (6862) has announced it will resume operation of the first 85 stores in 15 cities in mainland China and provide in-person food service for customers.
The Hong Kong-listed chain restaurants value at over USDD 22 bln has closed all its restaurants in mainland China since Jan 26, the second day of Lunar New Year public holiday, to cooperate with the prevention and control of COVID-19. During 45 days closure, it has taken active measures to salvage the substantial losses of the restaurants.
Customers’ wide range of choices and instant decision-making has made catering the most vulnerable industry by the epidemic. During this long period of shop-closed to prevent the coronavirus spread, 78% catering enterprises in mainland have lost more entire revenue. Haidilao, as a large-scale catering giant, is bounded to suffer from the losses during this period.
To ensure some steady supply of its restaurant food during the closure of the physical shops, it chose to resume some delivery services in Beijing on Feb 15, and subsequently in Shanghai, Xi'an, Shenzhen and other cities.
The latest financial data of Haidilao shows that its take-out business of RMB 188 mln only accounts for 1.6% of its total revenue in the first half of 2019. Although semi-finished dishes have been enriched the company's take-out products' categories, the revenue brought by the take-away food may be just a drop in the ocean.
Like all restaurants’ business model, rent, raw materials and manpower costs dominate most of the expenses of Haidilao. China Securities Cooperation (CSC) estimates that, the company has to expense about RMB 300 mln per month even in the state of closure. Fortunately, it has abundant cash and cash equivalents of RMB 3 bln as of H1 2019, plus recent bank loans of RMB 2.1 bln obtained last month, on standby.
Market experts believe once the repression during the epidemic control is released, retaliatory spending will shift towards the top brands. This puts Haidilao's supply chain, unique management system leading to more replicable stores may facilitate its further climb in market share.
Bloomberg forecasts that Haidilao's revenue is expected to achieve RMB 15.5 bln in the second half of 2019, up 61.5% year on year. And, as for H1 of this year, its revenue may reach RMB 9.4 bln, but still down 19.5% YoY.
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