On Thursday, Goldman Sachs adjusted its stance on Haidilao International Holding Ltd. (6862:HK) (OTC: HDALF), upgrading the stock from Sell to Neutral. The firm also revised its price target slightly to HK$15.70 from the previous HK$15.80. This change in rating follows a significant decline in Haidilao's share price, which has seen a 23% drop since May 17.
The new price target reflects a cautious optimism, with the analyst noting that the recent fall in the company's stock price has already accounted for several factors. These include lackluster growth in net income despite strong year-to-date table turn growth, increased labor costs associated with this higher table turnover, and fewer non-operating gains.
Moreover, the pace of store openings has been slower than anticipated, with only eight new stores by the end of May compared to management's goal of a single-digit percentage increase in store count. This slower expansion is expected to provide less support for second-half growth as the same-store sales growth (SSSG) base rises.
The analyst also pointed out a generally weaker sentiment in the restaurant sector and increased price competition within the quarter. Furthermore, the company announced a change in leadership on June 21, appointing Mr. Gou Yiqun as the new CEO in place of the former CEO, Ms. Yang Lijuan, who has taken the role of CEO at Super Hi.
Haidilao International Holding Ltd. is known for its hot pot restaurants and has been expanding its global presence. The company's performance is closely watched by investors as a barometer for the foodservice industry's health, particularly in the Asian markets where it primarily operates.
The recent leadership changes and market challenges have put the company in the spotlight as it adapts to the evolving competitive landscape.
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