Huazhu Group released its 2023 annual report. The company achieved operating income of 21.9 billion yuan/ +57.9% in 2023, and net profit of 4.1 billion yuan (-1.8 billion yuan in '22). In Q4 2023, revenue of 5.6 billion yuan/ 50.7% was achieved, and net profit to mother was 743 million yuan (-124 million yuan for the same period in '22).
RevPAR surpassed the same period in '19, and increased ADR led to growth. 1) Huazhu Hotels: 23q4RevPar was 229 yuan/YoY +43.8%, +20.0% over the same period in 2019; ADR was 284 yuan/YoY +18.3%, +22.5% over the same period in 2019; OCC was 80.5% /yoY+14.3pct, -1.7 pct compared to the same period in 2019. Looking at the full year, RevPAR was 242 yuan/YoY +53.9%, +22.4% over the same period in 2019; ADR was 299 yuan/YoY +26.6%, +27.4% over the same period in 2019; OCC was 81.1% /YoY+14.4pct, compared to -3.3 pct in the same period in 2019. 2) Deutsche Hotel Group: 23q4RevPar was €73/YoY +1.3%, +10.6% over the same period in 2019; ADR was €115/YoY -5.9%, +18.6% over the same period in 2019; OCC was 63.8% /YoY+4.5pct, compared to the same period in 2019. Looking at the whole year, RevPAR was 71 yuan/YoY +14.5%, +6.0% over the same period in 2019; ADR was 113 yuan/YoY +1.4%, +16.5% over the same period in 2019; OCC was 63.4% /YoY+7.2pct, compared to -5.7pct in the same period in 2019. ADR growth in 2023 was the main driver of RevPAR's recovery.
The pace of store expansion is steady, and 460 new stores were opened in Q4. 1) Huazhu hotels: In Q4 '23, the net opening was 235 (opening 460/225), and the direct management/franchise were net opening of 236; as of Q4 '23, there were 9263 active hotels, 885,630 guest rooms, and 3061 hotels to open. 2) German Hotel Group: Net opening of 2 companies in Q4 in '23 (opening 2/0), net opening of 2 directly managed companies. As of Q4 '23, the total number of DH hotels was 131, with 26,814 guest rooms, and 37 hotels to open.
High-end upgrades to the store structure are steadily expanding, and high-quality lean growth continues to be promoted. As of Q4 '23, the company had 9394 hotels worldwide, including 4984/3543/704/137 budget/midrange/high-end hotels, accounting for 53.1%/37.7%/7.5%/1.5% respectively; in terms of reserve stores, there were 1121/1503/397/69 economic/midrange/high-end hotels respectively. Hotel quality continues to be upgraded, and the main mid-range brand matrix has been further consolidated. The number of Hanting hotels reached 3,598 home/YoY +10.5%, and the number of hotels reached 2116 home/YoY +24.9% throughout the season; high-end brand hotels represented by Orange Crystal and Manxin continued to expand, with 704 stores and 397 reserve stores.
Investment advice: The company continues to take advantage of the three competitive advantages of product structure/brand effectiveness/membership system. Results of cost reduction and efficiency at the operational level have been shown, and high performance flexibility has begun to be realized. As the leading hotel barrier, the company is stable. The opening of the store in 2024 is expected to accelerate superposition and strong operating efficiency. The hotel's internal quality improvement and high-quality development, and the continuous integration of membership/supply chain platforms are expected to further optimize the company's subsequent performance and business quality. The estimated net profit for 24-26 will be 44/50/5.4 billion yuan, respectively, and the corresponding PE will be 24/21/19x, respectively, maintaining the “recommended” rating.
Risk warning: Opening stores falls short of expectations, tourism recovery falls short of expectations, and competition among hotel groups increases risk.