F-1/A: Super Hi International Holding Ltd. Files for U.S. IPO, Aiming to Expand Haidilao Hot Pot Brand

Super Hi International Holding Ltd., operator of Haidilao hot pot restaurants outside Greater China, is seeking to list its ADSs on the Nasdaq to fuel global expansion and enhance its brand.

Summary

• Super Hi International Holding Ltd., a leading Chinese cuisine restaurant brand operating Haidilao hot pot restaurants internationally, has filed an amendment to its F-1 registration statement for a proposed IPO in the United States.
• The company plans to offer 2,692,700 American Depositary Shares (ADSs), each representing ten ordinary shares, with the offering price to be determined based on the closing price of its ordinary shares on the HKEx.
• The primary goals of the IPO are to create a public market for its ADSs and secure additional capital for global expansion, supply chain improvements, and technology development.
• Super Hi International operates 115 self-operated restaurants in 12 countries as of December 31, 2023, and aims to leverage its brand recognition and standardized operations for further growth.
• The company's financial performance shows revenue growth from US$312.4 million in 2021 to US$686.4 million in 2023, with a net profit of US$25.3 million in 2023 after net losses in the previous two years.
• For the three months ended March 31, 2024, the company's revenue increased by 16.6% to US$187.6 million, but it incurred a net loss of US$4.5 million due to foreign exchange losses and decreased government grants.
• The company intends to use approximately 70% of the net proceeds for strengthening its brand and expanding its restaurant network globally.

Sentiment

Score: 6

Explanation: The document presents a mixed picture. While the company shows strong revenue growth and margin improvement, the recent quarterly loss and various risk factors temper the overall sentiment. The IPO is a positive step for expansion, but the company faces challenges in a competitive and uncertain global market.

Positives

• The company has a strong brand recognition and a proven management philosophy.
• The company has achieved significant growth and margin expansion in recent years.
• The company has a clear plan for using the IPO proceeds to further expand its business.
• The company's table turnover rate and average daily revenue per restaurant have improved significantly.
• The company has a seasoned management team with a corporate culture that prescribes acting with kindness.

Negatives

• The company incurred a net loss of US$4.5 million for the three months ended March 31, 2024.
• The company faces intense competition in the international market for catering services.
• The company is an emerging growth company and a foreign private issuer, which means it is exempt from certain reporting requirements.

Risks

• The company's multi-jurisdiction operations may lead to increasing risks and uncertainties.
• The company may fail to maintain or enhance brand recognition or reputation.
• The company may face risks related to the instance of any food safety incidents and any food-borne illnesses.
• The company may be unable to retain or secure key members of its management team.
• The company may face difficulties in protecting its proprietary know-how or intellectual property.
• The company may fail to be in compliance with regulatory requirements or obtain related licenses required by relevant authorities.
• The company may be unable to detect, deter and prevent all instances of fraud or other misconduct committed by its employees, suppliers or other third parties.
• Macroeconomic factors may have a material and adverse effect on the company's business, financial conditions and results of operations.
• The company may be subject to health epidemics and outbreaks, natural disasters, acts of war or terrorism or other factors beyond its control.
• The company may face risks in relation to labor disputes.
• The company may not be able to collect all of its trade and other receivables and thus are exposed to credit risk.
• The company's indebtedness could materially and adversely affect its business, financial conditions and results of operations.
• Taxation authorities could challenge the company's allocation of taxable income which could increase its consolidated tax liability.
• The company is subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws, and non-compliance with such laws could adversely affect its business, results of operations, financial condition and reputation.
• Increasing focus on environmental, social and governance matters may impose additional costs on the company or expose it to additional risks.
• The company's restaurant operations in various countries may subject it to cultural and language difficulties.
• The company's operations are susceptible to increases in its purchase costs of food ingredients and labor costs, which could adversely affect its margins and results of operations.
• The company has recognized, and may continue to recognize impairment losses for property, plant and equipment and right of-use assets.
• The company may need to obtain substantial financing for its operations. If it fails to obtain sufficient funding, its growth may be adversely affected.
• Share-based compensation expenses may cause shareholding dilution to the company's existing shareholders and potentially have a material and adverse effect on its financial performance.
• An active trading market for the ADSs may not develop and the trading price for the ADSs may fluctuate significantly.
• Since there will be a gap between pricing and trading of the company's ADSs, the price of its ordinary shares traded on the HKEx may fall during this period and could result in a fall in the price of its ADSs to be traded on the Nasdaq Stock Market.
• The time required for the exchange between the company's ordinary shares and ADSs might be longer than expected and investors might not be able to settle or effect any sale of their securities during this period, and the exchange between the company's ordinary shares and ADSs involves costs.
• Exchange between the company's ordinary shares and ADSs may adversely affect the liquidity or trading price of each other.
• The characteristics of the U.S. capital markets and the HKEx are different, which may negatively affect the trading prices of the company's ordinary shares and/or ADSs.
• The company's largest shareholder has substantial influence over the company and his interests may not be aligned with the interests of its other shareholders and ADS holders.
• The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise your right to direct how the ordinary shares represented by your ADSs are voted.
• The depositary for the ADSs will give the company a discretionary proxy to vote its ordinary shares underlying your ADSs at general meetings if you do not give voting instructions to the depositary, except in limited circumstances, which could adversely affect your interests.
• Substantial future sales or perceived potential sales of the ADSs, ordinary shares or other equity securities in the public market could cause the price of the ADSs to decline significantly.
• If securities or industry analysts do not publish research or reports about the company's business, or if they adversely change their recommendations regarding its ADSs and ordinary shares, the market price for its ADSs or ordinary shares and trading volume could decline.
• There can be no assurance that the company will pay dividends and you must rely on price appreciation of the ADSs for return on your investment.
• The company has not determined a specific use for a portion of the net proceeds from this offering and it may use these proceeds in ways with which you may not agree.
• There can be no assurance that the company will not be classified as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for any taxable year, which could result in adverse U.S. federal income tax consequences to U.S. Holders of its ADSs or ordinary shares.
• The company's articles of association contain anti-takeover provisions, which could have a material adverse effect on the rights of holders of its ordinary shares and the ADSs.
• You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited because the company is incorporated under Cayman Islands law, it conducts the majority of its operations, and all of its directors and executive officers reside outside the United States.
• ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action.
• Certain judgments obtained against the company by its shareholders may not be enforceable.
• Your rights to pursue claims against the depositary as a holder of ADSs are limited by the terms of the deposit agreement.
• You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China against the company's management that resides in mainland China based on foreign laws.
• Because the company's initial public offering price is substantially higher than its net tangible book value per share, you will experience immediate and substantial dilution.
• You may not receive cash dividends if the depositary decides it is impractical to make them available to you.
• You may be subject to limitations on the transfer of your ADSs.
• You may experience dilution of your holdings due to an inability to participate in rights offerings.
• Techniques employed by short sellers may drive down the market price of the ADSs.
• The company is a foreign private issuer within the meaning of the rules under the Exchange Act, and as such it is exempt from certain provisions applicable to domestic public companies in the United States.
• The company has identified a material weakness in its internal control over financial reporting. This material weakness could continue to adversely affect its ability to report its results of operations and financial condition accurately and in a timely manner.
• The company will incur increased costs as a result of being a public company in the United States, particularly after it ceases to qualify as an emerging growth company.
• As an exempted company incorporated in the Cayman Islands, the company is permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the Nasdaq Stock Market's corporate governance requirements; these practices may afford less protection to shareholders than they would enjoy if the company complied fully with the Nasdaq Stock Market's corporate governance requirements.
• The company is an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.

Future Outlook

The company intends to continue growing its international Haidilao brand, enhance the dining experience, strategically optimize and expand its restaurant network, and identify opportunities for organic growth and potential acquisitions.

Management Comments

• The company believes that its motivated employees lay the foundation for satisfied guests.
• The company believes that its management philosophy appeals to human nature across different cultures and regions and has been proven in Haidilaos expansion in the international markets.

Industry Context

The international market for Chinese cuisine restaurants is growing, with hot pot being one of the most popular and fastest-growing segments. The company is well-positioned to capture these favorable market opportunities.

Comparison to Industry Standards

• According to the Frost & Sullivan Report, Super Hi International was the third largest Chinese cuisine restaurant brand and the largest Chinese cuisine restaurant brand originating from China in the international market in terms of 2022 revenue.
• The company's brand is recognized by Brand Finance as one of the Top 25 Most Valuable Restaurant Brands, placing it alongside global chains like Starbucks and McDonalds.
• The company's management philosophy is recognized and studied across the world, including as a case study by the Harvard Business School.

Related Party Transactions

• Trademark license from Sichuan Haidilao.
• Purchase of goods/services from Yihai.
• Disposal of JAPAN HAI to Newpai.
• Loans made to and by subsidiaries of HDL Group.

Stakeholder Impact

• Shareholders will be impacted by the potential dilution from the IPO.
• Employees may benefit from the company's expansion and growth.
• Customers can expect enhanced dining experiences and new menu options.
• Suppliers may see increased business opportunities as the company expands its restaurant network.

Next Steps

• The company will continue to grow its international Haidilao brand.
• The company will enhance its dining experience and propagate Chinese culinary heritage internationally.
• The company will enhance restaurant performance and explore new sources of revenue.
• The company will strategically optimize and expand its restaurant network.
• The company will identify opportunities for organic growth and seek potential acquisition opportunities.

Key Dates

Keywords

Haidilao, IPO, hot pot, restaurant, ADS, international expansion, Chinese cuisine, Nasdaq, financial results, risk factors