Super Hi (9658 HK, HK$15.68, HK$10.2bn) 1Q25 results   

Super Hi operates the Haidilao hotpot restaurants outside of China.  It reported a mixed financial result for 1Q25, with revenue increasing by 5.4% YOY to US$198mn, comprising a 4.5% YoY growth in restaurant operations to US$188.4m and some strong growth from delivery (US$4.0M, +37.9% YoY) and other businesses (US$5.4M, +22.7% YoY).  However, operating income fell 33.9% YoY to US$8.2mn, with margins declining to 4.1% from 6.6% due to higher investments in customer initiatives and employee benefits. Despite this, the company turned around for a net profit of US$11.9mn from a US$4.5mn loss in the last corresponding period, aided by a reversal of FX losses amounted to some US$20.4mn. 

East Asia market saw higher growth - Super Hi expanded its network to 123 restaurants, opening four new locations while closing three underperforming ones. Guest visits rose 6.8% YoY to 7.8mn with the same-store table turnover rate improved to 4.0 times per day. Regional performance varied, with East Asia showing strong growth in table turnover (5.0x vs. 4.2x YoY) and average daily revenue per restaurant (US$19.3K vs. US$16.1K), while North America saw a decline in average spending per guest (US$39.6 vs. US$43.3 YoY). 

Continuous brand building - The Mgt emphasizes a focus on long-term customer loyalty through pricing strategies and food portion enhancement.  In addition, it will continue to diversify offerings via sub-brands and condiment sales. The company aims to build a "Different Haidilao" by refining product innovation and restaurant design, prioritizing sustainable growth over short-term margins. 

Our view - While revenue growth is steady, margin pressures and high staff costs (35.3% of revenue) pose risks. Stripping out the FX effect, 1Q25 adjusted pre-tax profit would be 33% YoY lower.   The company had about US$208mn cash on hand and debt free as at the end of March 2025, representing about 16% of the current share price.  The counter is trading at 24.4x forward PE.  We consider that a better control on costs to be a more sound catalyst over just top-line increase.