Super Hi International Flips the Switch: Operating Leverage Begins to Flow

Revenue up 10%, operating profit up 119% as margin release takes hold; delivery and other businesses double.

HDL · Earnings Call · 2026-08-26

From Investment to Payoff

Super Hi International's Q2 2026 report marks a clear inflection point. After two years of heavy investment in employees, customers, and store infrastructure, the overseas Haidilao operator is finally seeing the other side of the ledger. Revenue grew 10% year-over-year to $219 million, but operating profit surged 118.9% to $8.1 million, with the operating margin expanding 1.8 percentage points to 3.7%. As CEO Li Yu put it, “Profit growth has significantly outpaced revenue growth, reflecting the continued conversion of company's earlier investment and the beginning of the operating leverage release.” — Yu Li, CEO and Executive Director · 2026-08-26 The margin story is broad-based: the employee cost ratio fell roughly 1 percentage point to 34.3%, while rent, utilities, and depreciation as a share of revenue all declined. This is not cost-cutting for its own sake, but rather the result of earlier capacity-building. Management was explicit that the path forward is not further compression but efficiency—“Lifting underperforming stores to the average levels and this is a better way forward.” — Yu Li, CEO and Executive Director · 2026-08-26 The same logic applies to store openings: the payback period for new stores has tightened to 3–4 years, with Southeast Asia faster and Europe/Americas slower, but quality has improved.payback period is now a core metric in their expansion calculus.

The Middle Platform and Localization

A recurring theme in this call—and a genuine evolution from prior quarters—is the emphasis on building a middle platform capability building at headquarters while preserving frontline autonomy. This is a significant organizational shift. Previously, the company emphasized bottom-up store openings and regional manager discretion. Now, they are systematically building common capabilities: digital systems, bulk supply chain, personnel management, and membership infrastructure. The goal is to empower regions without imposing a one-size-fits-all model. As Li Yu explained,

The principle for overseas Middle platform construction is the headquarters should build common capabilities well, whilst the regions and stores should run their local business well.
Yu Li, CEO and Executive Director · 2026-08-26

This dovetails with the ongoing localization push. In Q2, delivery and other businesses generated $21 million, up 114.3% year-over-year, now representing 9.6% of revenue—up from about 5% a year ago. The growth is driven by sales of Haidilao-branded food products and the Pomegranate Plan's second-brand restaurants. Management stressed that local procurement is mature in markets like Singapore and Malaysia, and that central kitchens will expand only where store density justifies it. The Pomegranate Plan now spans 12 brands and 22 restaurants overseas, but the approach remains deliberate: “It's not about brand, but it's about model and capability first.” — Yu Li, CEO and Executive Director · 2026-08-26

The Non-Operating Drag

The only blemish on the quarter was a net after-tax loss of $1.93 million, driven by a foreign exchange loss of $4.34 million versus a gain of $16.33 million in the same period last year—a swing of over $20 million. Management was quick to characterize this as non-operating and non-cash, and they emphasized that they focus on operating profit as the true measure. The FX volatility is partly a base effect, but it also highlights the currency exposure inherent in a global business. CFO Qu Cong outlined a two-layer approach: natural hedging through localized revenue and costs, and active monitoring of residual cross-border exposures, explicitly ruling out speculative trading.

What's Changed, and Why It Matters

Comparing to prior quarters, the mindset has shifted from "we are investing for the long term" to "the investment is now yielding operational and financial returns." In the Q1 2026 call, management said they would not set profit targets and would prioritize customer and employee well-being. They repeated that theme here, but with a new confidence: “We will not set a specific profit margin target and then reverse deduced business behavior.” — Cong Qu, CFO and Secretary of the Board · 2026-03-31 Yet the numbers speak for themselves—the operating leverage is real. The prior call also emphasized patience with store quality: “We don't rush the process. We emphasize the quality of each store we launch.” — Jun Zeng, Analyst · 2025-11-26 That discipline is now paying off, as new store ramp-up times have shortened significantly. The combination of a leaner cost structure, a maturing middle platform, and a growing non-dining revenue stream positions Super Hi to scale more profitably. The market will be watching whether the operating margin can hold or expand as the company opens its targeted double-digit new stores in H2. The story is no longer about investment; it's about conversion.