Haidilao Earnings: Upping Fair Value by 25% Following Management's Accelerated Expansion Strategy

Following the impressive table turnover rates achieved by Haidilao and its aggressive store-opening strategy, we are increasing our fair value estimate for the company by 25% to HKD 17.10. Our base case assumes that the operating environment for restaurants in 2024 will be slightly better than in late 2023, and Haidilao should record positive same-store-sales growth for the full year, translating to a slight improvement in operating margin. That said, even after raising our fair value estimate, we still view Haidilao’s shares as fairly valued. Our preferred picks in the Chinese restaurant space are Yum China and Jiumaojiu.