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Chinese hotpot chain Haidilao's IPO valuation 'a bit high'

Category: Finance,Retail

Wan also questioned whether Haidilao would be able to sustain its unique qualities as it expands overseas, referring to the restaurant's additional services such as free manicures and snacks for customers waiting in line.

"Basically, I think the business model and the uniqueness of the company, whether it can be (sustained) well, will be something which investors should look at seriously," he said.

New entrants that enter the same market segment "can pose a really challenge to Haidilao," Wan said.

"The entry barrier is not really high, you know, someone can get in easily," he added, and Haidilao's competitive edge could face a "great challenge" if that happens.

"At this point in time, it's not clear to me outside of China how many people (are) actually, you know, willing to try the spicy hotpot," Hao Hong, a managing director and head of research at Bank of Communications International, said on CNBC's "Squawk Box."

Furthermore, Hong added, the demand for hotpot tends to be seasonal in nature, with greater consumption usually seen during winter.

"It's not entirely clear to me how they can replicate the Chinese model overseas," he said.

Nevertheless, Hong said "consumer names have been performing quite well" for 2018, adding that Haidilao is "a good company" with a business model that is "very easy to understand."

Haidilao's stock closed nearly flat at 17.82 Hong Kong dollars per share, although the stock jumped as much as 10 percent during its first trading day. The IPO was priced at 17.80 Hong Kong dollars per share.

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