The company released reports for the first quarter of 2023 and 2024. The company's revenue all achieved good year-on-year growth, but due to new store opening expenses, climbing periods, and leasing guidelines, profit growth was slower than revenue growth, profits were still not fully released, and we maintained our holdings increase rating.
Key points to support ratings
Revenue recovery is in line with expectations, and profits have yet to be fully released. In 2023, the company achieved operating income of 534 million yuan, a year-on-year increase of 56.16%; net profit to mother was 305.1999 million yuan, an increase of 2.60% year on year; net profit after deducting non-return to mother was 27.5935 million yuan, an increase of 8.31% year on year. In the first quarter of 2024, the company achieved operating income of 160 million yuan, an increase of 67.28% year on year; realized net profit of 4.66 million yuan, an increase of 13.94% year on year; realized net profit deducted from non-mother of 4.6704 million yuan, an increase of 52.45% year on year. The company's revenue side has recovered well, but the profit side is affected by new store opening fees and leasing guidelines, and is yet to be released. In terms of hotel management, multiple operating indicators are significantly higher than the level of 19. RevPAR/ADR/OCC in 2023 were 332.78 yuan/490.46 yuan/ 67.85% respectively, compared to 115.89%/114.82%/100.94% in 2019, respectively. On a quarterly basis, the 2023Q1-Q4 direct-managed hotel RevPAR was 280.46, 350.63, 369.89, and 320.45 yuan, respectively. In the first quarter of 2024, the directly-managed hotel RevPar was 314.77 yuan, the level of 120.97% in 2019, up 12.23% from the same period in '23.
Store expansion is continuing, or testing the waters of hotel asset management. The company's store expansion is ongoing, with 55 new hotels signed and 34 new hotels opened in 2023. 23 Throughout the year, the Junting series of brands completed the layout of the three regions of North China, South China, and Southwest China; the Junlan brand continued to increase cooperation with state-owned enterprises and top domestic companies, focusing on deepening the strategic layout of Beijing, Shanghai, Guangdong, etc.; the Jinglan brand, which focuses on local cultural characteristics, is also increasing its regional expansion efforts across the country, entering Jiangxi, Shandong, Shaanxi, and Ningxia for the first time. Furthermore, the company established the Shanghai Junda City Joint Venture in '23 to test the waters of the pre-REITS business and the hotel asset securitization business, which is expected to help the company develop its hotel asset management business.
valuations
The company's revenue and hotel business indicators all achieved good growth, but due to factors such as leasing guidelines and new store opening expenses, profit performance was lower than revenue growth. We adjusted the company's 24-26 EPS to 0.64/0.94/1.17 yuan, corresponding price-earnings ratio of 36.9/25.3/20.3 times, and maintained an increase rating.
The main risks faced by ratings
Market competition intensified, store expansion fell short of expectations, and new brand development fell short of expectations.