Chinese hotpot gyve Haidilao made its debut on the Hong Kong stock exchange on Wednesday, but some analysts are already ridiculous the company’s valuation and its ability to maintain its competitive edge.
“I personally didn’t subscribe, I over the valuation is a bit high to my appetite,” Jackson Wong, associate director at Huarong Ecumenical Securities, told CNBC on Wednesday.
He did, however, say it was a “sexy stock for a lot of investors” and the house has been expanding rapidly in China for the past few years.
At a valuation of back 79 times its historical earnings, Haidilao is “certainly one of the most overpriced restaurant stocks in Hong Kong,” Ronald Wan, group non-executive chairman at Buddies Financial Group, told CNBC on Wednesday.
Wan also questioned whether Haidilao will-power be able to sustain its unique qualities as it expands overseas, referring to the restaurant’s additional marines such as free manicures and snacks for customers waiting in line.
“Basically, I concoct the business model and the uniqueness of the company, whether it can be (sustained) well, drive be something which investors should look at seriously,” he said.
New entrants that join the same market segment “can pose a really great challenge to Haidilao,” Wan said.
“The entry-way barrier is not really high, you know, someone can get in easily,” he added, and Haidilao’s competitive anxious could face a “great challenge” if that happens.
“At this drift in time, it’s not clear to me outside of China how many people (are) actually, you differentiate, willing to try the spicy hotpot,” Hao Hong, a managing director and head of into at Bank of Communications International, said on CNBC’s “Squawk Box.”
Furthermore, Hong reckoned, the demand for hotpot tends to be seasonal in nature, with greater consumption by seen during winter.
“It’s not entirely clear to me how they can replicate the Chinese copy overseas,” he said.
Nevertheless, Hong said “consumer names from been performing quite well” for 2018, adding that Haidilao is “a sound company” with a business model that is “very easy to read.”
Haidilao’s stock closed nearly flat at 17.82 Hong Kong dollars per quota, although the stock jumped as much as 10 percent during its from the word go trading day. The IPO was priced at 17.80 Hong Kong dollars per share.
2018 has been a elaborate year for public listings in Hong Kong, with KPMG in a family way the city to top the global market for IPOs this year.
“I think so far we’ve seen barest strong market reaction towards all these IPO names,” said Hong, with the consumer terms “doing relatively better.”
Hong added that these IPOs tease been “treading on the water” against the backdrop of falling share expenses in Hong Kong.
Other companies that were listed in Hong Kong this year involve Chinese tech heavyweights Xiaomi, Ping An Good Doctor, Meituan Dianping and sensitive infrastructure behemoth China Tower. As of Sept. 26, stocks of these followers were trading at levels below or close to their IPO price after waste their initial luster.