Incident: Huazhu Group (1179.HK) announced its 2024 Q1 financial report. 24Q1 achieved revenue of 5.3 billion yuan/ +17.8%; net profit due to mother of 659 million yuan/990 million yuan in the same period last year; adjusted net profit of 771 million yuan/384 million yuan for the same period last year; adjusted EBITDA profit of 1,421 million yuan/profit of 1,031 million yuan for the same period last year.
The Q1 performance was higher than the revenue guideline, and domestic hotel revenue grew steadily. 24Q1 achieved revenue of 5.3 billion yuan/ +17.8%, higher than the guidance range of 12%-16%; its hotel revenue in China was 4.2 billion yuan/ +18.1%, mainly 24q1RevPar was 216 yuan/ +3.1%, and the number of hotels increased 14.4% year over year; German Hotel revenue was 1.03 billion yuan/ +16.6%; during the reporting period, the company achieved net profit of 660 million yuan/ -33.4%, mainly after 23Q1 sold part of Accor's shares and net profit after deducting 770 million yuan/year on year +100.8%. Gross margin optimization due to increased hotel revenue and operating leverage.
Occupancy rates and room prices increased slightly year over year. The company's 24Q1 overall occupancy rate/average room price/RevPar was 77.2% /280 yuan/216 yuan respectively, up 1.6%/1.1%/2.9% year on year; same store occupancy/average room price/RevPar increased 1.1%/-0.6%/0.9% year on year. Huazhu arranged annual housing prices ahead of schedule, making the overall business situation steady, moderate and positive, and the occupancy rate and housing prices gradually increased.
Q1 The pace of store opening is slowing down, and there are sufficient reserves of hotels to open. The 24Q1 company opened 569 new stores (2 direct-run stores + 567 franchises), closed 148 stores, and opened 421 net stores. The opening speed was significantly higher than 23Q1 (262) and 23Q4 (460). As of March 31, 2024, Huazhu had 3138 hotels to open, which is expected to support the company's annual opening target.
Gross profit margin increased year over year, and expenses increased year over year. 2024Q1's gross profit margin is 32.5% /+5.0pct, mainly due to revenue compounding the rigidity of hotel operating costs, in addition to reduced amortization and energy consumption costs. Q1 The company's overall cost rate for the period was 14.9%/+0.6pct year on year, of which the sales expense ratio was 4.9% /+0.5pct; the management expense ratio was 9.6% /+0.1pct. The company's operating profit margin during the reporting period was 19.0% /+4.2pct, and the adjusted net profit margin to mother was 14.6% /+6.0pct.
Investment advice: Huazhu expects revenue to increase 7%-11% year on year in 2024Q2, and its hotel revenue in China will increase 7%-11% year on year. The estimates are mainly revenue growth due to store expansion. RevPAR is expected to remain flat or decline slightly. As the base of the hotel industry gradually increased in the second quarter of 2023, compounded by the pressure on business travel and housing prices since 2024, subsequent same-store growth is difficult, but the number of company contracts and openings continues to rise, and store expansion is expected to provide growth impetus. The company's net profit for 2024/2025 is estimated to be 4.09 billion yuan/4.74 billion yuan. The current stock price corresponds to PE 21x, maintaining a “highly recommended” rating
Risk warning: the risk of macroeconomic downturn; industry competition intensifies; the pace of store expansion falls short of expectations.