Haidilao shares slide after chairman takes 100m yuan loan amid tax squeeze
Haidilao shares fell after chairman Zhang Yong secured a 100 million yuan loan from the company, following a September stake sale, as new mainland tax rules on offshore trusts pressure his finances. Citi cut its target price, warning of investor anxiety over the controlling shareholder's cash needs.
Haidilao (6862) shares slid on Tuesday after chairman and chief executive officer Zhang Yong secured a short-term loan of up to 100 million yuan (HK$117.27 million) amid mounting liquidity pressures driven by stringent new mainland tax rules on offshore trusts.
Haidilao announced on Monday that it would extend an unsecured, one-month loan of up to 100 million yuan to Zhang for personal financial arrangements. Funded by internal resources, the loan carries an interest rate of the one-month Hong Kong Interbank Offered Rate plus 60 basis points.
Citi slashed its target price for Haidilao from HK$19.5 to HK$15.5, warning that the debt arrangement, coming just five weeks after the September share sale, could rekindle investor anxiety over the controlling shareholder's cash needs.
The financing follows a massive stake disposal in September by controlling shareholder entity SP NP, which offloaded roughly 259 million shares, or 4.65 per cent of the company, at HK$10.63 apiece, raking in about HK$2.75 billion. The shares were tied to a discretionary trust set up by Zhang's wife, Shu Ping. The block trade sparked a sharp sell-off at the time, sending Haidilao's stock plunging more than 9 per cent.
Market watchers and investment banks have widely linked the series of liquidity moves to tough new mainland tax rules on offshore trusts unveiled in July. Under the regulations, Chinese tax residents with offshore trusts are liable for a retroactive 20 per cent personal income tax on trust gains, regardless of whether distributions are made.
Despite holding Singaporean citizenship, Zhang and his family are still classified as Chinese tax residents due to their core economic interests on the mainland. With the 90-day reporting and settlement window closing on October 22, overdue payments will incur an annualised 18.25 per cent surcharge. Mainland media estimates put the couple's potential tax shortfall at nearly 1.9 billion yuan, based on Haidilao's 2024 dividend payouts.
China Everbright Securities International's securities strategist Kenny Ng Lai-yin noted that the major shareholder's apparent liquidity strain could easily stoke market fears of further share disposals. However, he views the offshore trust tax liability as an isolated case that is unlikely to trigger a broader sell-off wave among mainland companies listed in Hong Kong.
Ng also expects Haidilao's dividend policy to remain largely stable, explaining that payout decisions are driven by corporate earnings and industry headwinds, not solely the majority shareholder's personal needs. On the business outlook, he added that while September table turnover rates showed tentative signs of stabilisation, a single month of data is insufficient to confirm an industry turnaround. Catering sector growth momentum is set to stay limited amid soft macro conditions and sluggish domestic demand.