HAIDILAO (06862) grants a RMB 100 million loan facility to Chairman of the Board Zhang Yong; Citi lowers target price to HK$15.5

On October 12, HAIDILAO (06862) agreed to grant a Hong Kong dollar loan facility of up to the equivalent of RMB 100 million to controlling shareholder, Chairman of the Board and Chief Executive Officer Zhang Yong, with a term of 30 days. Citi issued a report lowering its target price for HAIDILAO from HK$19.3 to HK$15.5, a reduction of about 20%, while maintaining a "Buy" rating. HAIDILAO fell by about 7% intraday today (the 13th), touching a low of HK$8.925. According to HAIDILAO's announcement on Monday, the proceeds are to be used solely for Zhang Yong's personal financial arrangements and may not be used for illegal activities, the purchase of HAIDILAO shares, the provision of loans to third parties, or purposes that violate regulatory requirements. The company has the right to monitor the use of funds and to demand mandatory early repayment in the event of a material default or adverse changes in financial condition. It is worth noting that this loan comes at a sensitive time when the mainland is stepping up tax enforcement on high-income groups. Sources say that special task forces have been set up in the mainland to track down the wealthy, with some teams even targeting just one billionaire. Citi noted in its report that this loan occurred only about five weeks after the controlling shareholder reduced its stake on September 8, reigniting market concerns about the controlling shareholder's funding needs, and it expects investor sentiment to skew negative in the short term. The bank also lowered its earnings forecasts for HAIDILAO, cutting its net profit forecasts for 2026, 2027 and 2028 by 9%, 14% and 15% respectively, and its sales forecasts by 2%, 3% and 3% respectively, taking a more cautious view of performance expectations for October to December.