F-1: Super Hi International Holding Ltd. Files for US IPO, Aiming to Expand Global Hot Pot Empire

Super Hi International Holding Ltd., operating Haidilao hot pot restaurants internationally, has filed for an initial public offering in the United States to fuel its global expansion.

Summary

• Super Hi International Holding Ltd., a leading Chinese cuisine restaurant brand operating Haidilao hot pot restaurants internationally, has filed a registration statement for an IPO in the U.S.
• The company intends to list its American Depositary Shares (ADSs) on the Nasdaq Stock Market under the symbol HDL.
• As of December 31, 2023, Super Hi operates 115 self-operated restaurants in 12 countries across four continents.
• The company plans to use approximately 70% of the net proceeds from the offering to strengthen its brand and expand its restaurant network globally.
• Approximately 10% will be invested in supply chain management capabilities, another 10% in research and development for digitalization and other technologies, and the remaining 10% for working capital and other general corporate purposes.
• In 2023, the company recorded revenue of US$686.4 million and net profit of US$25.3 million, a significant turnaround from net losses in 2021 and 2022.
• The offering includes a 30-day option for the underwriters to purchase additional ADSs.
• Morgan Stanley and Huatai Securities are acting as underwriters for the offering.

Sentiment

Score: 7

Explanation: The document presents a generally positive outlook, highlighting strong growth and margin expansion. However, it also acknowledges risks and challenges, including past losses and potential future issues. The sentiment is moderately positive.

Positives

• The company achieved strong same-store sales growth of 54.0% in 2022 and 8.8% in 2023.
• The overall table turnover rate improved from 2.1 times per day in 2021 to 3.5 times per day in 2023.
• Average daily revenue per restaurant increased from US$10.0 thousand in 2021 to US$16.3 thousand in 2023.
• The income from operation margin improved from 0.2% in 2022 to 6.3% in 2023.
• Restaurant level operating profit margin significantly improved from 4.1% in 2022 to 9.0% in 2023.

Negatives

• The company incurred net losses in 2021 and 2022.
• The company identified a material weakness in its internal control over financial reporting.

Risks

• The company's multi-jurisdiction operations may lead to increasing risks and uncertainties.
• The company faces intense competition in the international market for catering services.
• Uncertainties relating to the growth of the international market for Chinese cuisine restaurants could adversely affect revenues.
• Rising interest rates could negatively impact performance and restaurant expansion plans.
• An active trading market for the ADSs may not develop and the trading price may fluctuate significantly.
• The company is an emerging growth company and may take advantage of certain reduced reporting requirements.
• The voting rights of holders of ADSs are limited by the terms of the deposit agreement.
• Substantial future sales of the ADSs or ordinary shares could cause the price of the ADSs to decline significantly.
• The company may be classified as a passive foreign investment company, which could result in adverse U.S. federal income tax consequences.
• The company's articles of association contain anti-takeover provisions.
• Shareholders may face difficulties in protecting their interests because the company is incorporated under Cayman Islands law.
• ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement.
• Certain judgments obtained against the company by its shareholders may not be enforceable.
• The company may be unable to receive compensation from suppliers for contaminated ingredients used in dishes and indemnity provisions in supply contracts may be insufficient.
• The company may not be able to adequately manage its inventory.
• Sites of the company's existing restaurants may become unattractive, and new restaurants may not be able to obtain quality sites at commercially reasonable prices.
• The company's information technology systems are subject to risks.
• The improper collection, transfer, use or disclosure of data could harm the company's reputation.
• The company's insurance policies may not cover the risks relating to its business and operations.
• The company may not be able to adequately protect its proprietary know-how or intellectual property, including its recipes.
• 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 cannot guarantee that it will not be involved in claims, disputes and legal proceedings in its ordinary course of business.
• 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.
• Increasing focus on environmental, social and governance matters may impose additional costs on the company.
• 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.
• 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.
• Share-based compensation expenses may cause shareholding dilution to the company's existing shareholders.
• 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.

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.

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 favorable market opportunities due to its brand recognition and management philosophy.

Comparison to Industry Standards

• According to the Frost & Sullivan Report, Super Hi International Holding Ltd. 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 international expansion to 115 restaurants in 12 countries as of December 31, 2023, makes it the largest Chinese cuisine restaurant brand in terms of number of countries covered by self-operated restaurants.
• The company's table turnover rate of 3.5 times per day in 2023 is a key performance indicator that reflects its operational efficiency and customer demand.
• The company's restaurant level operating profit margin of 9.0% in 2023 demonstrates its ability to generate profits from its restaurant operations.

Related Party Transactions

• Trademark license from Sichuan Haidilao.
• Purchases from Yihai International Holding Ltd.
• Disposal of JAPAN HAI to Newpai.

Stakeholder Impact

• Shareholders: Potential for increased value through company growth and profitability.
• Employees: Continued employment and potential for career advancement.
• Customers: Enhanced dining experience and expanded restaurant network.
• Suppliers: Increased business opportunities through expanded operations.
• Creditors: Increased financial stability and ability to meet obligations.

Next Steps

• The company has applied for listing of the ADSs on the Nasdaq Stock Market under the symbol HDL.
• The underwriters expect to deliver the ADSs against payment therefor through the facilities of the Depository Trust Company on or about , 2024.

Key Dates

Keywords

Haidilao, IPO, Hot Pot, Restaurants, International Expansion, Chinese Cuisine, Financial Results, ADS, Offering, Food Safety