Puyin International released a research report stating that Super Hi International conducted a deep strategic adjustment in 2025 with the aim of "benefiting customers and benefiting employees," which led to pressure on average customer spending, a year-on-year increase in the expense ratio, and a significant year-on-year decline in operating profit margin. After a year of adjustment, the company's first-quarter 2026 results showed not only a year-on-year increase in table turnover rate but also a significant year-on-year recovery in operating profit margin aided by operating leverage. This indicates the company has largely emerged from the adjustment period in the first quarter of 2026 and has begun to release performance. The company's valuation has corrected to a relatively low level over the past 12 months (less than 6.0x 2026 EV/EBITDA), making its value proposition prominent again, and market attention is expected to gradually recover. The firm upgraded Super Hi International to a "Buy" rating, with a new target price of HK$13.7 for its Hong Kong shares and US$17.5 for its US shares (based on 7.0x 2026 EV/EBITDA). Puyin International's main views are as follows:
**Transitioning from Strategic Adjustment to Harvest Period, Benefiting 2026 Performance Release** Following targeted operational adjustments, the company's overall average table turnover rate reached 4.0 for the first time in the fourth quarter of 2025. Although table turnover rates in North America and other regions saw significant year-on-year declines at the beginning of 2026 due to weather factors and geopolitical influences, benefiting from robust performance in Southeast Asia and East Asia, the overall table turnover rate for the first quarter of 2026 remained at 4.0. Management indicated that the table turnover rate since April has largely maintained the level of the first quarter of 2026. The firm forecasts that the full-year 2026 table turnover rate is expected to record a year-on-year increase.
Although management stated the company will adhere to the strategic principle of "benefiting customers and benefiting employees," based on the positive operating leverage from the increased table turnover rate, continuous improvement in operational efficiency, and a lower base, the firm expects employee costs and fixed expense ratios for 2026 to decline significantly year-on-year, helping the operating profit margin rebound substantially and essentially return to 2024 levels.
**Net New Store Openings Expected to Rise Year-on-Year in 2026** The company net opened only 4 new stores in 2025 (opened 13 new stores while closing 9 stores). The company opened one new store in Southeast Asia in the first quarter of 2026. Management stated that the number of stores currently signed and in the preparation phase for opening remains in the double digits. The firm predicts the number of new store openings this year will largely maintain last year's level (12-13 stores), but the number of store closures is expected to decrease significantly, with net new store openings expected to rise year-on-year to a high single-digit figure. Although the company still adheres to the principle of cautious store expansion, the firm believes the long-term space for store expansion remains very substantial.
**Why the Long-Term Growth Potential of Super Hi is Viewed Positively** Due to the vast overseas market and relatively dispersed store locations, the firm believes Super Hi's average table turnover rate is relatively less affected by store network expansion. Furthermore, competition in overseas dining markets is not as intense as in the domestic market, which is more conducive to the company implementing its Pomegranate Plan tailored to local conditions and expanding categories beyond hot pot. Based on the above, the firm predicts that over the next three years, the company is expected to drive relatively fast revenue growth with a stable store opening pace (10-15 new stores annually) while maintaining a stable table turnover rate, and the operating profit margin is expected to improve continuously with the optimization of the company's operational efficiency.
Investment risks: Intensified industry competition; significant increase in labor costs.
Comments