occurrences
On April 28, 2024, the company announced its results for the first quarter of 2024, with revenue of 1,845 million yuan/ +11.47%, net profit due to mother of 121 million yuan/ +49.83%, net profit of 97.39 million yuan/ +102.19%.
reviews
Q1 RevPAR is growing year over year. The total RevPAR for 1Q24 hotels was 131 yuan/ +0.1%, recovering to 92.2% in the same period in '19, 4q23+0.8pct, split volume price OCC -0.8pct year over year, +1.4% year over year with ADR; the caliber RevPar without light management was 147 yuan/ +2.0%, of which ADR increased by 2.2%, which was the main driving force for RevPAR growth; hierarchical economic/middle grade/light management RevPAR was +1.3%/-0.3%/-2.1%, respectively. In terms of opening stores, 1Q24 opened 205/30 new stores and completed the target of opening new businesses at the beginning of the year about 17.1% (based on the lower limit of 1200 companies). According to the model, 2/203 companies were directly operated/franchised, and 36/66/103 new stores were opened by economy, medium and high-end management respectively. The middle and high-end accounted for 32.2% /+11.2pct of new openings, increasing their contribution.
The increase in revenue was compounded by an increase in gross margin, and the profitability of the hotel business increased significantly. By business segment, 1Q24 hotel business revenue was 1.64 billion yuan/ +11.5%, total profit margin of 51.81 million yuan/ +649.8%, corresponding profit margin 3.2% /+2.7pct; scenic area operation revenue was 210 million yuan/ +10.9%, total profit of 120 million yuan/ +5.7%, corresponding profit margin 59.0% /-3.0 pct. On the cost and expense side, 1Q24 gross margin/sales expense ratio/management expense ratio was 36.6%/8.2%/13.4%, +5.9/2.2/1.3 pct year over year, 6.5%/5.3% net interest rate due to year-on-year net interest rate of 6.5%/5.3%, respectively. The increase in profitability was mainly due to rising gross margin, which is speculated to be related to asset lightening and improved hotel operation efficiency.
Acquired 9% of Huanhui Real Estate's shares and claims to complement the high-end hotel layout. The company plans to use 9.71 million yuan in cash to acquire 9% of Huanhui Real Estate's shares held by the controlling shareholder First Travel Group, and use 518 million yuan to acquire the principal and interest of First Travel Group's corresponding claims of Huanhui Real Estate up to the evaluation date; in addition, it will continue to provide 254 million yuan of shareholder loans to Huanhui Real Estate. The purpose of the acquisition is to invest in and operate commercial supporting complex projects in the Tongzhou Cultural Tourism Zone. The projects include self-owned hotels, outlets (operated by Wangfujing Olai), and the construction of a small town. Among them, the hotel uses the luxury brand “Nolan”, with a total construction area of about 35,000 square meters and about 350 guest rooms, and entrusts the wholly-owned subsidiary of First Travel Hotel to operate First Travel Anno for a period of 15 years. We believe that the project has a good location and high-end facilities, which will help improve the company's high-end hotel layout.
Profit Forecasts, Valuations, and Ratings
Q1 Under increased pressure on the industry, the company's RevPAR achieved positive growth. We look forward to the arrival of the next peak season in the industry and the improvement of the company's own operations. We expect 24-26E net profit of 9.1/10.1/1.21 billion yuan, corresponding PE to 18/17/14X, maintaining a “buy” rating.
Risk warning
There is a risk that RevPAR's short-term growth will be pressured, and the speed of opening stores will fall short of expectations, etc.