Short-sellers are targeting Haidilao.

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With a sharp drop in share price and sluggish growth in core business, hotpot chain giant Haidilao is being attacked by short sellers, with the market lacking confidence in its long-term growth prospects.

According to S&P Global data, the short selling ratio of Haidilao stock accounts for about 11% of its free float shares, making it the third most shorted company in the Hang Seng China Enterprises Index. This data reflects the market’s increasingly pessimistic expectations for the company’s future performance.

Haidilao’s share price has fallen 29% from its March peak, hitting a one-year low, with short interest surging to the highest level in nearly three years.

Haidilao’s interim results released last month show the company saw a decline in sales for the second consecutive half-year, mainly impacted by takeaway price wars and weak consumer spending. Morningstar analyst Ivan Su said:

"There is a lack of clarity on when consumer confidence can improve, which adds to the uncertainty facing Haidilao."

Diversification Fails to Resolve Core Dilemma

Facing growth pressures, Haidilao has tried to seek breakthroughs by exploring overseas markets and launching new brands. The company has introduced new brands such as the BBQ-focused "Yenqing BBQ House," hoping to revive its results with a diversification strategy.

However, these efforts have had limited effect. HSBC analyst Lina Yan pointed out that questions about brand differentiation and customer engagement created "uncertainty over when these brands will start to generate meaningful revenue."

Ashley Dudarenok, founder of China Insights and Training firm ChoZan, believes diversification efforts may create excessive operational complexity while failing to offset the slowdown in the core hotpot business.

Data shows that Haidilao’s table turnover rate in the first half of this year declined 9.5% year-on-year. This deterioration in a key operational metric highlights the company’s management challenges. The company not only needs to cope with intensifying market competition but also maintain growth momentum in an environment of cautious consumer spending.

Despite facing numerous challenges, most analysts remain optimistic about Haidilao’s stock. According to data compiled by Bloomberg, the stock has 32 buy ratings and zero sell ratings.

Analysts’ average target price shows that from Thursday’s closing price, the stock has 28% upside potential in the next 12 months.

Kenny Ng, strategist at Everbright Securities International, said that potential government stimulus measures could help Haidilao recover, and that China’s commitment to around 5% economic growth for 2025 may require measures to boost consumer spending, making the overall policy environment "favorable."

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