BOCI Research lifted its target price for Haidilao International Holding (06862) to HK$54 from HK$42 but downgraded its rating to "sell" from "hold".
Haidilao expects 2020 earnings to slump 90% from RMB2,345m in 2019. Excluding the forex loss of RMB235m, the research house estimated 2H 2020 net income should also be lower than 2H 2019, despite total store count is expected to bump up from 768 by end-2019 to an estimated 1,268 by end-2020.
Besides the impact of COVID-19 on table turnover across last year, BOCI believes Haidilao also started to suffer from the heavy cost burdens and store cannibalisation caused by rapid scaling-up.
Hence, it expects the group's net margin to gradually narrow from 10% in 2017/18 to 7% in 2021/22. In addition, BOCI sees the current valuation of 82.3x/57.5x 2021/22 P/E as overheated, even based on its 32% 2019-21 earnings CAGR.
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