Description of the event
The company released its financial report for the first quarter of 2024. During the period, it achieved revenue of 1,845 million yuan/ +11.47%, net profit due to mother of 121 million yuan/ +49.83%, net profit of 97 million yuan/ +102.19%, and EPS of 0.11 yuan. The year-on-year increase in 2024Q1's business performance is mainly due to the continued recovery and scale growth of the travel market.
Incident reviews
ADR growth has driven RevPAR growth, and the scenic area business has reached a new high. 2024Q1's hotel business revenue was 1,639 million yuan/ +11.54%, and total profit was 52 million yuan/ +649.82%, which recovered to 84%/88% in the same period in 2019, respectively, and marginal profit margins increased. Benefiting from the continuous recovery of the tourism market, the scenic area business revenue was 206 million yuan/ +10.9%, total profit was 122 million yuan/ +5.65%, and the number of visitors to Nanshan Scenic Area was 2.47 million/ +17.3%.
Directly managed stores performed better than lightly managed stores. 2024Q1 Company's RevPAR131 yuan/ +0.1%, ADR217 yuan/ +1.4%, OCC 60.1% /-0.8pct; all hotels excluding lightly managed hotels RevPAR147 yuan/ +2%, ADR233 yuan/ +2.2%, OCC 63.4%/-0.2pct. Among them, economic/high-end hotel RevPAR was 94%/90% for the same period in 2019, ADR was 114%/100% for the same period in 2019, respectively, and OCC was 83%/90% for the same period in 2019, respectively.
2024Q1 opened 205 new stores (210 new stores opened in the same period last year), 2 direct-run stores/203 franchised stores; 36 economic/high-end and light-managed hotels were 36/ 66/ 103, respectively.
At the end of the period, the share of mid-range and high-end hotel rooms increased to 40.2%. The number of stores that have been signed and not yet opened and is currently under contract is 1940, and there are plenty of reserve projects.
During the period, the company's gross profit margin was 36.59% /+5.93pct, and the net profit margin was 7.25% /+1.34pct. The overall cost ratio is 27.57% /+2.3 pct, including sales expenses ratio 8.22% /+2.22pct, management expenses ratio 13.35% /+1.33pct, R&D expenses rate 0.77% /+0.01pct, and financial expenses ratio 5.23% /-1.26pct.
Net cash flow from operating activities of 596 million yuan/ -33.82% is a year-on-year increase in payment of year-end bonuses and taxes.
Investment advice
The company is expected to continue to improve its performance by benefiting from the growing business travel and leisure travel market sentiment. We expect the company's 2024-2026 EPS to be 0.83\ 0.89\ 0.95 yuan respectively, corresponding to the company's closing price of 15.08 yuan on April 26, and PE 18.2\ 17\ 15.9 times for 2024-2026, respectively, to maintain the “holds-A” rating.
Risk warning
There is a risk that the company's operating costs will rise; the risk of opening new stores will fall short of expectations; and the recovery of consumer consumption will fall short of expectations.