Huazhu Hotel announced that it achieved revenue of 21.9 billion yuan/58% year-on-year increase in 2023, net profit to mother of 4.09 billion yuan/loss of 1.82 billion yuan in the previous year, and adjusted EBITDA of 6.87 billion yuan/only 610 million yuan last year. It led the industry in terms of operating data and performance. Travel during the 2024 Spring Festival is hot, and demand for leisure is expected to continue. In the first half of the year, the exhibition supported business travel demand, and supply in the hotel industry accelerated after the pandemic, and the chain rate and concentration continued to increase, leading players are expected to continue to benefit from pattern optimization. In the long run, store expansion and brand upgrading will still be the core driving force for Huazhu's future performance growth. The company has a long competitive advantage in brand, membership, and technology-enabled operations, and is expected to cross the bull-bear cycle of hotels and achieve long-term steady growth. Investors are advised to pay active attention.
The 2023 operating data led the industry, and the revenue and profit performance was impressive. In 2023, Huazhu RevPar recovered to 122% of the same period in 2019, and was implemented more successfully in terms of stock economic renovation and high-end structural upgrades. RevPAR recovery was 10% to 15% ahead of peers. In 2023, the company opened 1,641 new hotels, closed 789 stores, and opened a net of 852 businesses. In 2023, it achieved revenue of 21.9 billion yuan/58% year-on-year increase, net profit of 4.09 billion yuan/loss of 1.82 billion yuan in the same period last year, and adjusted EBITDA of 6.87 billion yuan/only 610 million yuan in the same period last year. It led the industry in terms of profit volume and growth rate.
Industry concentration and penetration rate have increased, and leisure will support travel demand in 2024. Affected by the epidemic, the supply side of the hotel industry has accelerated, and the concentration of the hotel industry is high. Jinjiang, Huazhu, and First Travel are the top three leaders in the industry. CR3 increased year by year from 19-21, and Huazhu steadily ranked second in the industry. With the full recovery of domestic leisure tourism and the steady recovery of business travel demand in 2023, leading data rebounded sharply. The supply and demand mismatch in the 2024 hotel industry is expected to be mitigated next year, but structural upgrades in various hotel chains are driving room price growth.
Diversified brands & membership systems & digital technology build core competitiveness. The company has now built a rich brand matrix to fully cover all levels of the market. The share of high-end hotels represented by Full Season and Orange Hotel is increasing year by year, and the brand layout is getting better and better. Furthermore, through the establishment of a rich and complete membership system, the company's membership size is at the top of the industry and has contributed more than 70% of the nights. With increasingly improved infrastructure enabled by technology, operational efficiency and customer experience are expected to continue to be optimized.
Investment advice and profit forecast: The company expects to open 1,800 new hotels, close about 650 stores, and net open about 1,150 in 2024, which is significantly faster than in 2023, and expects annual revenue growth of 8%-12% year-on-year in 2024. We expect the company to achieve operating income of 243/26 billion yuan in 2024-2025, an increase of 11.1%/7.0% over the previous year; the company's net profit for 2024-2025 is estimated to be 43.2/4.94 billion yuan, which is lower than that of peers. For the first time, it is covered with a “Highly Recommended” rating, and investors are advised to pay active attention.
Risk warning: The epidemic has repeatedly affected the normal operation of hotels. Store expansion has fallen short of expectations, macroeconomic downturn, industry competition has intensified; overseas hotels are under pressure.