A top Chinese hot pot chain has seen US$4 billion in its market value evaporate this week, as the government’s escalating curbs to contain a resurgence in Covid-19 cases take a toll.
Haidilao International Holding tumbled as much as 7.9% on Wednesday to the lowest since March 2019. The drop brought the stock’s three-day decline to 20%, making it the worst performer on Hong Kong’s Hang Seng Index this week.
Hot pot restaurant tanks as China steps up Covid controls
A nascent recovery in China’s retail spending is endangered this month as the government has moved to restrict cross-province travel tours, with an initial flareup in Covid-19 cases in the country’s northwest quickly spiralling into a nationwide surge. More than 150 infections were found over the past week in the mainland, and health authorities have warned the outbreak could worsen further.
The outlook of Haidilao’s recovery has remained uncertain, even though the company is probably ready to shut down more loss-making outlets to improve profitability, according to Credit Suisse (Hong Kong) analyst Veronica Song.
“The company has been struggling with slower than-peer recovery due to dilution of poor performing stores,” she wrote in a Tuesday note, cutting the target price on the stock 20% to HK$25.5.
Consumer staples broadly weakened this week in the mainland, underperforming their Asia peers with a loss of as much as 3.8%. The benchmark CSI 300 Index was down as much as 1.4% in the period, also trailing the MSCI Asia Pacific Index’s 0.5% slide.
In Hong Kong, restaurant operators Jiumaojiu International Holdings sank as much as 9.7% this week while and Xiabuxiabu Catering Management China Holdings Co. fell 5.9%.