Super Hi Reports Unaudited Financial Results for the First Quarter of 2025

Super Hi International Holding (HDL) reported a 5.4% increase in revenue to $197.8 million for Q1 2025, driven by restaurant operations and delivery business growth; however, income from operations margin decreased to 4.1% from 6.6% year-over-year due to investments in customer and employee benefits. The company expanded its restaurant network, opening 4 and closing 3 underperforming locations, resulting in 123 total restaurants, and saw a slight increase in same-store table turnover rate to 4.0 times per day. Profit for the period was $11.9 million compared to a loss of $4.5 million in the same period last year, primarily due to a decrease in net foreign exchange loss.

Analysis

Super Hi International Holding Ltd. (HDL) reported Q1 2025 revenue of US$197.8 million, a 5.4% year-over-year increase, supported by a 4.5% rise in Haidilao restaurant operations revenue (US$188.4 million) and a robust 37.9% growth in its delivery business (US$4.0 million). This top-line expansion was driven by a 6.8% increase in total guest visits to 7.8 million and an improved same-store table turnover rate of 4.0 times per day, up from 3.9 in Q1 2024, alongside a net addition of one restaurant, bringing the total to 123. However, the company's strategic initiatives, including "more rational pricing strategies," "enhancing portion value," and increased investment in employee benefits, contributed to higher costs. Raw materials and consumables as a percentage of revenue rose to 34.0% from 33.5%, and staff costs increased to 35.3% of revenue from 33.9%. Consequently, income from operations decreased by 33.9% to US$8.2 million, and the operating margin contracted significantly to 4.1% from 6.6% in the prior-year period. Despite this operational pressure, Super Hi achieved a net profit of US$11.9 million, a notable turnaround from a US$4.5 million loss in Q1 2024. This shift to profitability was primarily due to a US$20.4 million decrease in net foreign exchange losses, rather than an improvement in core operational earnings. A key metric, average spending per guest, declined to US$24.2 from US$24.9 year-over-year, reflecting the impact of the new pricing and value strategies.

Key Decisions for Investors

• Investors should closely monitor the evolution of operating margins in subsequent quarters to assess if management's strategic investments in customer value and employee benefits translate into sustainable long-term profitability, thereby justifying the current margin compression.
• It is crucial to evaluate the durability of revenue growth, especially considering the decline in average spending per guest, and scrutinize the tangible outcomes of the "Pomegranate Plan" and other customer-centric initiatives in enhancing market share and diversifying revenue streams.
• Given that the significant improvement in net profit was largely driven by favorable foreign exchange movements, investors should differentiate these non-operational gains from underlying operational performance trends when appraising the company's earnings quality and future financial health.