The hotpot brand's international arm, Super Hi, is on track to post buoyant annual profits but under the surface increased competition is crimping margins

image credit: Bamboo Works

Key Takeaways:

• The company expects revenues from restaurants outside China to have risen nearly 8% in 2025, while profits are set to jump 56%, inflated by currency gains
• Restaurant-level operating margins slipped under increased cost pressure

In Vancouver shopping malls and parts of Los Angeles or New York, long lines are forming outside hotpot restaurants. And it's not just Chinese families who are dipping their sliced meat into a shared pot of spicy broth.

The convivial hotpot is becoming a popular choice outside of China, especially with younger age groups, offering dining chains a new way to boost their takings as domestic consumption slows in a bloated Chinese restaurant market.

Leading hotpot chain Haidilao (6862.HK) has made expansion outside China a strategic priority and has tasted success in the form of rising earnings.

Super Hi International Holding Ltd. (NASDAQ:HDL) (9658.HK), which operates the chain's overseas outlets, has projected its revenue will maintain a steady growth pace for 2025, increasing around 7.9% to at least $840 million, while net profit was estimated to leap 56% to at least $34 million.

But a closer reading of the March 2 profit outlook reveals a more nuanced picture, with currency factors inflating the earnings increase. The company made about $14 million in foreign exchange gains in 2025 after a loss of around $19.7 million in 2024. Excluding currency effects, the earnings uplift was relatively modest. The restaurant-level margin also edged lower, weighed down by higher labor and operating costs.

There are two key takeaways from the numbers. Firstly, steady revenue indicates overseas demand is not significantly weakening. Secondly, Super Hi is choosing to absorb some profitability pressure to maintain footfall and protect its established market position.

In recent years, hotpot dining outside of China has been virtually synonymous with Haidilao. A first-mover advantage and recognizable brand helped the company establish a firm foothold across North America and Southeast Asia. But as more Chinese restaurant chains expand overseas, they are exporting their domestic rivalry to the new markets.

Feeling the heat

One of the challengers targeting North American diners is Jiumaojiu International (9922.HK), known for a signature fish dish with pickled vegetables in a tangy broth. Earlier this year, Jiumaojiu boosted its stake in Big Way Hot Pot, a chain with 21 outlets across Canada and California, to 49% in a deal valued at about $43 million. Big Way Hot Pot is building a fan base among Chinese communities and younger foodies with its flexible option allowing diners to select their own set of ingredients to dunk in the broth.

Beyond Big Way Hot Pot, several other brands have emerged in Canada and along the U.S. West Coast. These include versions of the all-you-can-eat Little Sheep and Happy Lamb hot pots, as well as Boiling Point, which focuses on individual dining, and various fusions of Japanese and Korean one-pot cuisines. In most cases, prices are pitched at the middle-class consumer and products may be customized to local tastes.

However, Haidilao continues to follow its standardized Chinese approach as regards service, store design, staff training and supply chains. The model drives brand recognition and delivers a consistent taste experience, but at the cost of greater capital investment and management challenges. The strategy also relies heavily on maintaining table turnover rates and average spending per customer.

As competition heats up, Haidilao has slowed its aggressive pace of expansion, focusing instead on enhancing single-store profitability and boosting regional density. Its defensive moves include tweaking its menus in some markets, introducing more localized offerings, and seeking to control labor costs.

Haidilao has so far managed to sustain revenue growth, but the tighter margins indicate that overseas markets are not the wide-open profit opportunity they once were. In its profit update, Super Hi attributed the margin decline to a proactive strategy of investing in customers and employees, incurring higher costs.

A key valuation marker going forward will be whether the restaurant chain can improve its single-store efficiency.

Investors remain cautious about Super Hi. Its Hong Kong-listed shares have fallen about 29% over the past year to around HK$13, near the lower end of a 52-week range. The stock slipped slightly even after the profit alert, reflecting concerns about the quality and sustainability of earnings growth. Super Hi trades at a forward price-to-earnings (P/E) ratio of about 17, below Jiumaojiu's 20 and Yum China's (9987.HK) 25.

The overseas hotpot craze has moved beyond the stage of simple brand-driven growth. The cutthroat competition in China's restaurant industry is now replicating itself overseas, raising a fundamental question for the Haidilao brand. Once the hype dies down, can its overseas business deliver sustainable profits?

To subscribe to Bamboo Works free weekly newsletter, click here

Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.