2023 results were better than our expectations
The company announced 23-year results: revenue of 17.2 billion yuan, +24% year-on-year; net profit to mother of 307 million yuan (loss of 545 million yuan in '22). The results were better than our expectations, mainly due to Club Med's positive growth record.
Adjusted EBITDA in '23 was +59% YoY to $3.7 billion, of which revenue from disposal and sale of resorts was $280 million. The profit share of real estate sales declined compared to 2019, and the profit quality improved markedly: property development and sales accounted for about 0.4% of adjusted EBITDA in '23 (about 26% in '19).
Club Med: Revenue in '23 was +19.2% to $15.1 billion, +18% compared to '19, with Europe, Africa, Middle East/US/Asia Pacific +11%/+63%/+2% compared to '19. Capacity was restored to 97.7% in '23, occupancy rate was -1.5ppt compared to '19, and average daily bed price +31% compared to '19 (consistent exchange rate). Adjusted EBITDA +46.6% YoY in '23 to $3.208 billion.
Atlantis Sanya: Revenue in '23 was +91% to 1.67 billion yuan, with an average daily room rate of -2.3% and an average occupancy rate of +38.9ppt to 81.9%. The number of visitors reached a record high of 6.077 million (vs. 2.901 million in '22). Adjusted EBITDA in '23 was +158% YoY to $745 million.
Other: The turnover of the Lijiang project in '23 was +21% to 108 million yuan, and the number of visitors was +10% compared to the same period last year to 192,000. Reunion's revenue was +9.0% year-on-year to 355 million yuan.
Cash flow and debt: Net operating cash flow +80% year over year to $4.04 billion, capital expenditure +32% year over year to $1.61 billion. Cash and bank balances of $3 billion at the end of the year, total interest-bearing bank loans and other loans of $11.7 billion (a decrease of $300 million compared to 2012), of which $3.6 billion needed to be repaid within one year.
Development trends
Club Med is growing steadily, focusing on upgrade strategies and the expansion of new villages. As of March 2, the cumulative 1H24 reservation volume (consistent exchange rate turnover) was +14% (average daily bed price +8%, hotel room night +5%), and the cumulative 2H24 reservation volume recorded was +5% year-on-year. By the end of '23, high-end and exclusive resorts accounted for 97.4% of capacity (+9ppt compared to '19). According to the company's performance report, the company is expected to continue to deploy the mountain/premium series with a higher customer base (average bed price exceeds the current average by 20%), and the annual capacity of the resort in '26 will increase by 19% or more compared to '23.
Yate continues to enrich non-housing content; if you pay attention to the Taicang/Lijiang project, climbing and revisiting will reduce losses. In January-February '24, Yate recorded a turnover of 464 million yuan, an increase of about 16.5% over the previous year, an average occupancy rate of about 94.8%, and an average daily room price of about 2,989 yuan; we expect the company to continue to enrich the supply of non-housing content.
In January-January '24, the Lijiang project recorded a turnover of 20.1.5 billion yuan, an increase of about 21.4% over the previous year, and the number of visitors was 35,000. The Taicang project opened in November of last year. It is recommended to pay attention to the upward trend in the market. Furthermore, it is recommended to pay attention to the release of profits due to narrowing losses due to revisiting.
Profit forecasting and valuation
Carefully consider the steep decline in real estate sales and new projects. The 24/25 EBITDA was lowered by 2%/0.2% to 3.71 billion yuan/3,948 million yuan, and the 24/25 net profit was reduced by 4%/15% to 349 million yuan/428 million yuan. The current stock price corresponds to 24 times the EV/EBITDA in 6 years. Maintaining an outperforming industry rating and considering sector valuation correction, the target price was lowered by 23% to HK$6.8, corresponding to 7 times EV/EBITDA in 24 years, with 62% upside.
risks
The recovery of Club Med and Atlantis fell short of expectations; new project development and climbing fell short of expectations.