Super Hi's Q2 Loss Is a Currency Problem, Not a Business Problem

Super Hi International reported a $1.9 million net loss for the second quarter of 2026. That headline will register with investors who watched the stock fall roughly 26% over the past year. But the loss came from a $20.6 million foreign-exchange hit caused by local currency depreciation against the dollar — not from the restaurant business. Strip that out and the underlying story is something different: operating profit nearly tripled year-over-year, margins expanded, and the free-cash-flow machine keeps running.

The company operates Haidilao, a Chinese hot pot chain, outside of Greater China. Hot pot is a communal dining format — diners cook raw ingredients in a shared bubbling broth at the table — and Super Hi runs 129 restaurants across Southeast Asia, East Asia, North America, and smaller markets. The international business was carved out from the parent company (also Haidilao, listed separately in Hong Kong) and went public on NASDAQ under the ticker HDL.

What changed in the quarter

Total revenue grew 10% to $218.8 million. The restaurant core — still 90% of the business — grew 4.6% to $197.8 million. But the faster growth came from two new streams: delivery revenue more than doubled to $7.6 million, and "other revenue" (branded condiments, food products, and second-brand restaurant experiments under something called the Pomegranate Plan) jumped 119.7% to $13.4 million. These diversification lines are still small, but their growth rate suggests real traction.

Operating profit more than doubled to $8.1 million, up from $3.7 million in the same quarter a year earlier. Operating margin expanded 1.8 percentage points to 3.7%, driven by revenue growth pulling ahead of cost growth. Raw materials as a share of revenue held essentially flat at 34.1% versus 34.0% last year. Staff costs fell one percentage point to 34.3% from 35.3%, reflecting the operating leverage that comes when more customers flow through existing kitchens and service teams. Management told investors in the earnings call that the raw material ratio should stay "basically stable" in 2026 and that employee cost ratios will thin as revenue grows.

Customer traffic grew 5.2% to 8.1 million visits. Overall table turnover rose from 3.8 to 3.9 times per day. Both metrics tick up, which matters more than the revenue headline because turnover is the leading indicator of whether a restaurant is pulling or pushing its business.

What the loss hides — and what it doesn't

The $20.6 million forex loss is the entire reason the company swung from a $16.4 million profit a year ago to a $1.9 million loss. Super Hi earns revenue in Singapore dollars, Malaysian ringgits, Korean won, Canadian dollars, and a handful of other currencies, but reports in U.S. dollars. When those local currencies weaken, translation losses hit the bottom line. This is a reporting effect on multi-currency assets and liabilities, not a cash event that changed how the restaurants performed.

That said, it's not nothing. If the dollar continues to strengthen — or if key markets like Southeast Asia face currency pressure — the translation problem repeats. The operating profit number is the cleaner measure for judging the business, and that's where the improvement shows.

Where the picture isn't uniform

Not every region is firing. The same-store sales breakdown tells the real story:

• East Asia — sales up slightly, table turnover jumped from 4.8 to 5.2 turns per day. This is the highest-performing region.
• Southeast Asia — sales up modestly, turnover improved from 3.7 to 3.8 turns. Solid but slow.
• North America — sales fell from $37.9 million to $34.7 million, and same-store turnover dropped from 4.0 to 3.6 turns per day. This is the problem area.
• Other markets (Australia, UK, UAE) — sales and turnover both declined.

North America carries roughly 22 of the 129 stores and contributed 17% of same-store sales. A 10% decline in same-store revenue there is not noise. It could reflect local competition, consumer weakness, or simply the friction of running a Chinese dining concept in a fundamentally different food culture. Management's 2026 plan calls for a "prudent, bottom-up" expansion pace — country managers decide on timing, headquarters controls quality. That discipline suggests they're not going to throw more stores at the problem.

The cash-flow bridge

This is where the case gets concrete. Trailing-twelve-month free cash flow is $66 million, against a $907 million market capitalization. That puts the stock at roughly 13x trailing FCF. Operating cash flow for the TTM period is $119 million. The company holds $237 million in cash against $343 million in total debt, giving it a roughly even cash-to-debt ratio. Current ratio sits at 2.5x, well above the stress zone.

The free cash flow margin — 7.6% of revenue — reflects a business that generates real cash from restaurant operations, even through quarters with translation headwinds. Over the full year 2025, the company reported $840.8 million in revenue, $37.4 million in operating profit, and built capital reserves to $270 million. The TTM growth rate on revenue is 10.2%.

What the forward path looks like: if operating margins continue expanding toward the 5.7%–5.9% range the company achieved in the second half of 2025, and revenue grows another 8%–10% in the second half of 2026, operating profit should trend toward $40 million annually. That would be a meaningful step up from the $37 million run rate of 2025, and it would come with a lighter expansion burden — management said the company is shifting from "increasing investment" to "optimizing investment" in 2026.

What would prove the thesis, and what would break it

The case rests on two conditions: operating margin continues expanding despite the growth in delivery and second-brand initiatives, and North America stabilizes before the deterioration spreads.

If those hold, the free cash flow machine improves and the market eventually stops pricing the company for the translation-hit, margin-compressed version of last year. The stock trades at roughly 16x forward earnings and 1x trailing revenue — not cheap on absolute terms, but reasonable for a 30% return on invested capital business growing 10% with expanding margins.

The break condition is simpler: if same-store sales decline again in Q3, especially in North America and Southeast Asia, the operating leverage story reverses. Rising staff costs (which already include wage increases in certain countries) would then be growing into a flat revenue base, and margins would compress. That's the scenario worth watching.

The earnings call on August 26 should provide more color. Management has been explicit that they won't make "disorderly profit concessions" and that 2026 is about precise input-output ratios. The operating numbers so far support that discipline. The question is whether the regional divergence narrows or widens over the next six months.