Event

According to the semi-annual report released by the company, in 2018 H1, the company achieved a revenue of 478 million yuan, an increase of 4.92% over the same period last year, and a net profit of-143 million yuan, an increase of 45.6546 million yuan over the same period last year.

Brief comment

The scope of the table affects the hotel business, and the real estate transfer income has increased significantly.

The company's two main businesses, hotels and real estate, contributed income of 413 million yuan and 45.6266 million yuan respectively during the reporting period, accounting for 86.36% and 9.54% of the total income, respectively. Among them: 1) the hotel business dropped 8.19% in the first half of the year compared with the same period last year, mainly due to the change in statistical caliber caused by the release of Beijing Century Huatian. Under the same caliber situation, the revenue of the hotel industry increased by 1.23% compared with the same period last year. Specifically, the revenue from guest rooms and catering in the hotel business is 1.82 yuan and 142 million yuan respectively, and the catering income accounts for 35.91%, mainly because the company's hotels are high-end; 2) the real estate business has increased significantly by 1758.70% in this period. mainly due to the settlement of income from Zhangjiajie and Yiyang projects. On the whole, the company's main business is steadily rising.

The company's operating efficiency index fluctuated to a certain extent during the reporting period, and the three major sales / management / financial rates were 2.66%, 58.76%, 28.55%, respectively, compared with the same period last year + 0.01pct/-4.16pct/+6.85pct. Among them, the main reason for the larger increase in financial rates is that the financial expenses of the current period are completely expended, while 34 million yuan of interest is capitalized in the same period last year. At the same time, due to the improvement in operation, the operating cash flow increased by 34.29% in the current period.

The hotel is expanding well and is optimistic about the acceleration of light assets operation in the future.

According to the statistics of China Hotel Industry Association and Yingdie Information, the company ranks 25th in domestic hotel group size and third in chain high-end hotel brand, indicating that the company's high-end hotel brand value is high. At present, the company has a total of 65 self-operated plus hosting hotels, of which 21 and 44 are self-operated and managed respectively, with more than 1.28 million members. In the first half of the year, there was a net increase of 3 hotels (all trusteeship), with an increase of about 40,000 members. At the same time, the company's hotels have covered various prefectures and cities in Hunan, and radiated to Wuhan, Beijing, Changchun, Shenzhen and other parts of the country.

The light asset model will accelerate. The company has a large stock of property. in the future, after selling its own property, the company will operate the hotel in the form of lease or trusteeship. On the one hand, this light asset operation mode will achieve the optimal use of the company's resources. on the other hand, it can also reduce interest expenses and depreciation expenses. At present, the hotel industry is in an upward range of prosperity, which is not only good for the expansion of the company, but also conducive to the growth of business customers.

The reform will further stimulate the motivation of the company and promote the transformation and upgrading of the industry.

Since the change of chairman in April 2017, the overall management level has been continuously optimized and adjusted. It not only established the "five modernizations construction" to improve the hotel management level of the company, but also accelerated the industrial extension, including washing and housekeeping services, property cleaning services, old-age health care services, Hunan cuisine raw material development and other major life services, to achieve industrial transformation and upgrading.

Investment advice: we believe that the company has the driving force for reform and real estate business support in the short term, and will benefit from the diversified layout of hotels, such as light assets and high-end pension supported by the real estate business in the long run. It is estimated that the EPS in 2018-2020 is 0. 5% respectively. 10, 0.12, 0.15 yuan, the current stock price corresponding to PE is 27X, 24X, 19X, covering for the first time, given the "overweight" rating.

Risk tips: real estate projects are regulated, settlement progress is not as expected, capital expenditure is high, and competition in the hotel market intensifies.