Super Hi International reported 2023 revenue of US$690m (+23% YoY), and net profit of US$25.3m (+161% YoY), in line with our expectation. We maintain 24E EPS forecast of US$0.09, 25E forecast of US$0.12 and introduce 26E forecast of US$0.14. We maintain target price of HK$18, and with 54% upside potential, we maintain Buy rating.
　　“Bottom-up” store opening, with no net addition in 2H23. In 2023, the company opened five new stores, including four in 1H23 and one in 2H23, and closed one store in 2H23 due to the change of property nature. All new restaurants achieved breakeven within 3 months of opening. As of the end of 2023, the company operated a total of 115 restaurants in international markets, with 70 in Southeast Asia, 17 in East Asia, 18 in North America, and 10 in other regions. The company entered the UAE market for the first time.
　　Improving table turnover and restaurant-level operating profit margin. The table turnover rate increased from 3.3x in 1H23 to 3.8x in 2H23, and same-store table turnover rate increased from 3.3x in 2022 to 3.6x in 2023. The restaurant-level OPM improved by 4.9 ppts YoY to 9%, mainly benefiting from the improvement in operational efficiency under the "low base salary, high dividends" salary structure, such as enhancing product quality and customer satisfaction through marketing activities, as well as optimizing cost structure.
　　Management structure adjustment. The previous management structure of “Headquarters - Regional Managers-Restaurant Managers” has been adjusted to the current management structure of “Headquarters-Senior Regional Managers-Country Heads-Restaurant Managers”. Some headquarters responsibilities such as product development, procurement, marketing, etc., have been further divided into regional and national levels, promoting greater efficiency in daily operations.
　　Maintain BUY. We like the company’s potential in overseas store opening with Haidilao brand, as well as its innovation capability in localisation, qualified management team and mature management mechanism that supports rapid store expansion, and continuously optimised supply chain management to bring higher margins. We maintain target price of HK$18, and with 54% upside potential, we maintain Buy rating.
　　Risks: Slower-than-expected store openings; negative news and food safety incidents.