The Zhitong Finance App learned that J.P. Morgan Chase released a research report stating that the initial “increase in holdings” rating was given to Huazhu (HTHT.US), and the target price was 40 US dollars. The bank believes that the company's industry-leading efficiency provides short-term resilience and long-term upside potential.
According to the bank, the company is the second-largest hotel operator in China (ranked first among private hotel operators), and in terms of the number of hotels, the company had 15% market share in the hotel chain industry in 2022. Thanks to its industry-leading efficiency, the company had the highest revenue to profit ratio after the pandemic. Although recent macroeconomic factors may limit the increase in revenue per saleable property in the hotel industry, the bank expects the company to provide the most flexible financial performance among its listed peers. By penetrating more cities, the company's operating profit will grow at a CAGR of 17% in 2023-2025.
The bank said the company achieved the best visibility for revenue growth by expanding brand awareness. The company plans to close the gap in South/Central China and second-tier cities, focusing on expanding from the current more than 1,100 cities to 2,000 cities. The bank anticipates that its strong brand awareness and execution capabilities will net the company more than 900 hotels each year. Furthermore, as the revenue structure is upgraded to mid-range and high-end hotels (from 30% + in 2019 to 50% + in 2023), the bank expects this to drive the company's 2023-2025 CAGR faster than its major listed peers. The bank believes that macro-adverse factors will push more hotel property investors to switch to brands with higher consumer recognition.
The bank believes that due to its excellent operating efficiency, the company's profit growth will make it more resistant to macro headwinds than its peers. The bank added that the company clearly outperformed its peers in terms of average room price/revenue per sellable room, number of new hotels added, and improved profit margins.
The bank said the company will be the best beneficiary of the long-term upside brought about by industry consolidation. According to Frost & Sullivan data, the bank expects leading hotel groups to take more market share. Hotel chains are expected to account for 48% of the total number of hotels in China in 2026, up from 39% in 2022, and the company will take the largest share of the market through its industry-leading brand awareness and efficiency.