Introduction to this report:
2023Q4 operating data was in line with expectations and improved month-on-month compared to November in December. The company's operational efficiency and strategy have always led the industry, and will continue to benefit from improved domestic demand.
Summary:
Operating data is in line with expectations, leading the industry and increasing holdings. Maintain the adjusted net profit of RMB 4.187 billion (CNY, same below), and reduce the adjusted net profit for 2024/25 to RMB 44.79/55.00 (-2.8/-0.75) billion yuan, giving 2024 28 xPE with a target market value of RMB 126.8 billion and maintaining the target price of HK$42.50 billion.
Incident: ① Overall 2023Q4 recovered to 120% in 2019, -9pct month-on-month, and slowed month-on-month; of these, ADR recovered to 122.5% (2023Q3 was 132.1%) and OCC recovered to 97.9% (2023Q3 97.9%). ② It recovered to 120/117/ 123% in 10/11/12, and the overall overseas 2023Q4 RevPAR recovered to 111% in 2019 (107% in 23Q3); ③ 460 new domestic companies were opened, 225 were closed, 235 were net, 3,061 were to be opened, and 2023Q3 was 2,935.
The off-season advantage is more obvious, and the operating strategy is shifting from price priority to balance volume and price. ① Huazhu has always maintained the lead in store quality and operational efficiency. Considering internal adjustments from major industry leaders, Huazhu's operating data and efficiency advantages were more obvious during the Q4 off-season; ② The monthly data trend exceeded expectations, with a marginal increase in recovery in December compared to November, which was better than the overall trend of the industry, further highlighting its own level of operation; ③ judging from volume and price splitting, OCC's recovery was basically flat, but the 2023Q4 operation strategy was adjusted from price priority to balance between volume and price.
Reserve stores guarantee the pace of opening stores, and the actual demand in the travel chain is expected to be better than expected. ① The market is more concerned about the continuation of the 2024 boom and the desire to expand stores. Compared to 2023Q3, the slowdown in 2023Q4 store expansion is in line with seasonal patterns. The contract situation for the whole of 2023 actually exceeded expectations. Judging from the number of stores in reserve, the pace of opening stores in 2024 is worry-free. Considering the competitiveness of other industry leaders, we are optimistic about signing the contract in 2024. ② Currently, the market is generally pessimistic about 2024 expectations based on the 2023Q4 boom trend. Actual travel demand is resilient, and continuous product structure upgrades hedge against potential business travel fluctuations. ③ Boosting domestic demand has always been an important direction. Service and experiential consumption satisfy the desire for a better life, and are in line with current consumption trends. Huazhu is the leading strategy in the industry. The organizational and efficiency advantages are obvious.
Risk warning: The recovery in demand for business and domestic travel fell short of expectations; increased competition affected the company's store prices and profit margin levels