Super Hi’s 1H24 revenue increased 15% YoY to US$371m, with a net loss of US$4.65m, mainly due to foreign exchange losses of US$19.5m. We lower our 2024E EPS forecasts from $0.09 to $0.05, 2025E from $0.12 to $0.08, and 2026E from $0.14 to $0.1. We lower target price from HK$18 to HK$15.8, with 21% upside, we maintain a Buy rating.
　　Steady new store opening. In 1H24, the company opened 8 new stores and closed 1 store, with a total of 122 stores. The number of stores in Southeast Asia/East Asia/North America/other regions was 74/18/20/10, accounting for 61%/15%/16%/8% respectively, and revenue accounting for 55%/12%/21%/12% respectively. In 1H24, the company entered the Philippine market.
　　Improving table turnover rate and average ticket price affected by exchange rate. The average table turnover rate in 1H24 was 3.8x, with an increase of 0.5x YoY. By region, the turnover rate in East Asia increased 1x YoY to 4.1x, mainly due to the continuous improvement of operations in Korea, the adjustment results in Japan, and a temporary suspension for two inefficient stores in Japan. In North America, the turnover rate increased 0.9x to 4.1x, mainly due to flexible marketing strategy in the U.S. and Canada. The company’s average ticket price was US$24.6, with a decrease of US$0.9 YoY, in which 90% of the decline was due to exchange rate, as the average ticket price denominated in local currency increased steadily in most countries and decreased in North America.
　　Operating margins improved at restaurant level. Restaurant-level operating margin increased by 0.4ppts YoY to 8.7%, mainly due to the increase in table turnover rate. Gross profit margin increased by 0.1ppts YoY to 66.4%, mainly due to the continuous optimization of supply chain management. The staff cost ratio increased by 0.8ppts YoY to 34%, mainly due to the increase in number of store employees and the increase in legal minimum salary requirements in some countries.
　　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 a Buy rating.
　　Risks. Store expansion may fall short of expectations. Negative news and food safety incidents.