Incidents:
The company released its report for the first quarter of 2024. 24Q1 achieved revenue of 3.21 billion yuan/YoY +6.8%, net profit attributable to mother was 190 million yuan/YoY +34.6%; net profit after deducting non-return to mother was 60 million yuan/YoY -31.2%.
Direct hotels store pressure on the revenue side, and dispose of properties to enhance performance
On the revenue side, 24Q1's full-service hotel/limited-service domestic/limited-service overseas/catering revenue was 0.4/22.6/8.8 billion yuan respectively, +112.8%/+7.0%/+6.1%/+6.4% year-on-year respectively. Combined with operating data, the increase in hotel revenue is expected to be driven by the expansion of the scale of franchised hotels; there is still pressure on the revenue side of directly-managed hotels. On the profit side, the reason there is a clear difference between net profit attributable to mother and deductions is that the Louvre Group obtained disposal proceeds from the disposal of several hotel properties.
RevPAR declined year-on-year, and structural upgrades continued to advance
In 24Q1, the domestic limited-service hotel RevPAR was 145 yuan/YoY -1.6%. ADR increased 1.3% year over year, but OCC declined by 1.7 pct to suppress RevPAR performance. Looking at the sub-model, joining (YoY -1.7%) is better than direct management (YoY -2.4%). In terms of price, the economy model (YoY -1.2%) is better than the mid-range (YoY -4.1%). 24Q1 Overseas Limited Service Hotel RevPar was €36/ YoY -0.1%. In line with the domestic market, ADR continued to rise (YoY +1.6%), but failed to make up for the OCC's decline of 0.9 pct. Looking at the sub-model, direct management (YoY +1.2%) is better than joining (YoY -0.4%). In terms of price, the mid-tier (YoY +2.8%) is better than the economy (YoY -1.3%).
24Q1 Company opened 222 new hotels, net increase of 147 hotels. At the end of March, the company's total number of stores reached 12,595, and the middle and high-end proportion continued to increase by 0.4 pct; the company reserves 4106 hotels to support the plan to open 1,200 new hotels in 2024.
Euribor rose year on year, with significant pressure on interest expenses
The 24Q1 gross margin of the company was 35.4% /-0.4 pct year over year. The sales expense ratio is 7.5% /year over year +0.1 pct; the management expense ratio is 18.7% /y-1.5 pct year over year, which is still at a high level compared to First Travel (13.4%).
Dragged down by rising overseas interest rates (24Q1 Euribor increased by about 1.3 pct year on year), the company's 24Q1 financial expenses were 210 million yuan, and the cost rate was 6.7%/+1.7 pct/y. High. Interest expense pressure continues to suppress the company's performance. In 24Q1, the company's net interest rate of non-return to mother was only 1.9% /-1.2pct year over year.
Profit Forecasts, Valuations, and Ratings
We expect the company's revenue for 2024-26 to be 15.7.9/16.7.9/17.83 billion yuan respectively, with year-on-year growth rates of 7.8%/6.3%/6.2%, net profit to mother of 14.8/18.5/2.05 billion yuan respectively, 47.4%/25.1%/10.9%, and EPS 1.4/1.7/1.9 yuan/share respectively. As the turbulent period of company reform has passed, the membership system has gradually improved, and overseas pressure has moderated marginally. Referring to comparable company valuations, we gave the company 25 times PE in 2024, with a target price of 34.49 yuan, maintaining a “buy” rating.
Risk warning: Consumption recovery falls short of expectations; store expansion falls short of expectations; reform results fall short of expectations.