Jin Jiang Hotel released its report for the first quarter of 2024. In 24Q1, the company achieved operating income of 3.26 billion yuan/YOY+6.77pct, -13.3% year-on-year; realized net profit of 190 million yuan/YoY+34.56pct, recovering to 64.29% in 19Q1; realized net profit withheld from mother 62.319 million yuan/YOY-31.19pct, -12.03% YoY compared to 19Q1; non-recurring profit and loss reached 128 million yuan/YOY+235 pct, including 119 million non-current liquidity Gains and losses on asset disposal are mainly proceeds from the disposal of hotel properties by the Louvre Group from January to March '24.
Affected by interest rates on overseas bonds, financial expenses increased significantly year-on-year. In Q1 '24, we achieved a gross profit margin of 35.4% /YoY -1.2%, a sales expense ratio of 7.5% /YoY+0.1pct, a management expense ratio of 18.7% /YoY+1.6pct, and a financial expense ratio of 6.7% /YoY+1.7pct. The absolute value increased by 62.1 million yuan year-on-year; achieved a net profit margin of 5.9% /YoY+1.4pct, and achieved a net profit margin of 1.9% /YOT-1.3pct. The increase in the financial expense ratio is mainly due to a combination of effects such as an increase in the Eurobank interest rate compared to the same period last year, leading to an increase in interest expenses on loans from overseas companies compared to the same period of the previous year.
Domestic business data was under year-on-year pressure, and overseas remained stable year-on-year. The company's domestic 24Q1 limited service hotel business achieved RevPar 145.25 yuan/YoY -1.55%, of which the average room price was 242.41 yuan/YoY +1.3%, and the occupancy rate was 59.92% /yoY-1.74pct. The decline in occupancy rate constituted a major drag on operating data. The overseas limited service hotel business achieved RevPar 35.65 EUR/YoY +0.06%, with an average room price of 63.37 EUR/YoY +1.62%, and an occupancy rate of 56.26% /YOY-0.94pct. Looking at the same stores, the 24q1 domestic direct-run hotel RevPar was 125.03 yuan/yoY -5.2%, of which the average room price was 220 yuan/YoY +1.55%, and the occupancy rate was 56.83% /yoY-3.78pct; the participating hotel RevPar was 151.40 yuan/YoY -3.2%. The average room price was 240.40 yuan/YOY-0.11pct, and the occupancy rate was 62.98% /YOY-1.95pct. The operating level of directly-managed hotels is still relatively weak. The 24Q1 budget hotel RevPar was 94.22 yuan/YoY -3.3%, of which the average room price was 170.32 yuan/YoY +0.14%, and the occupancy rate was 55.32% /yoY-1.90pct; the middle and high-end hotel RevPar was 174.2 yuan/YoY -4.4%, and the average room price was 264.86 yuan/YoY -0.76%, with an occupancy rate of 65.77% /yoY-2.42pct.
Stores continued to expand, and core brand contributions increased steadily. The 24Q1 company opened 222 new stores, with a net increase of 147 stores, of which 141 were mid-range hotels, and the Lifeng/Zhefang/Xian/ Hampton and Vienna departments had a net increase of 23/13/12/25/27, respectively, making up the main number of new stores. A total of 221 new limited-service hotels were opened, with a net increase of 126 hotels. Of these, the number of directly-managed hotels decreased by 7 and the number of franchised hotels increased by 153.
Investment suggestion: Jinjiang Hotel operations are recovering steadily. As the company's brand matrix is further improved, direct stores are upgraded and optimized during the year, high-quality development of franchisees, member/supply chain platform integration, reform, optimization and incentives, etc., the company's subsequent business quality is expected to be further optimized. The company's net profit for 24/25/26 is estimated to be 17.5/19.2/2.09 billion yuan, respectively, and the corresponding PE is 18/16/15x, respectively, maintaining the “recommended” rating.
Risk warning: Market recovery falls short of expectations, risk of falling management fees, and increased competition in the hotel industry.