"Short sellers" are targeting HAIDILAO
HAIDILAO's stock price has fallen 29% from its peak in March, reaching a new low in a year, with short interest surging to its highest level in nearly three years. Data shows that the short selling ratio of HAIDILAO's shares accounts for about 11% of the free-floating shares, making it the third highest company in terms of short selling ratio in the Hang Seng China Enterprises Index. The company has experienced sales declines for two consecutive half-year periods, with a year-on-year decrease in table turnover rate of 9.5%, impacted by a price war in takeout services and weak consumer demand
With a sharp decline in stock prices and sluggish growth in core business, hot pot chain giant HAIDILAO is facing a short-selling attack, and the market lacks confidence in its long-term growth prospects.
According to data from S&P Global, the short-selling ratio of HAIDILAO's stock accounts for about 11% of its freely traded shares, making it the third highest company in terms of short-selling ratio in the Hang Seng China Enterprises Index. This data reflects the market's increasingly pessimistic expectations for the company's future performance.
HAIDILAO's stock price has dropped 29% from its peak in March, reaching a new low in a year, with short positions surging to the highest level in nearly three years.
HAIDILAO's interim results announced last month showed that the company experienced a decline in sales for the second consecutive half-year, mainly impacted by a price war in takeout services and weak consumer spending. Morningstar analyst Ivan Su stated:
"There is a lack of clarity on when consumer confidence can improve, which increases the uncertainty faced by HAIDILAO."
Diversification Expansion Fails to Resolve Core Dilemma
In the face of growth pressure, HAIDILAO is attempting to seek breakthroughs by expanding into overseas markets and launching new brands. The company has introduced new brands such as "Banquet BBQ House," which specializes in barbecue, hoping to revitalize performance through a diversification strategy.
However, these efforts have had limited effect. HSBC analyst Lina Yan pointed out that issues surrounding brand differentiation and customer engagement have created "uncertainty about when these brands will start to generate meaningful returns."
Ashley Dudarenok, founder of the China insights and training company ChoZan, believes that diversification efforts may create excessive operational complexity, which cannot offset the slowdown in the core hot pot business.
Data shows that HAIDILAO's table turnover rate in the first half of this year decreased by 9.5% year-on-year, and the deterioration of this key operational metric highlights the operational challenges the company faces. The company not only has to cope with increasingly fierce market competition but also needs to maintain growth momentum in an environment of cautious consumer spending.
Despite facing numerous challenges, most analysts remain optimistic about HAIDILAO's stock. According to data compiled by Bloomberg, the stock has received 32 buy ratings and zero sell ratings.
The average target price from analysts indicates that, based on Thursday's closing price, the stock has a potential upside of 28% over the next 12 months.
Kenny Ng, an international strategist at Everbright Securities, stated that potential government stimulus measures could help HAIDILAO's recovery, and China's commitment to a growth target of about 5% for 2025 may require measures to boost consumer spending, making the overall policy environment "favorable."
