Key points of investment
Q1 revenue exceeds performance guidelines: In 2024, the Q1 company achieved revenue of 5.30 billion yuan, +18% year-on-year, exceeding the guideline by 12-16%. Among them, Huazhu's revenue was 4.20 billion yuan, +18% year over year; DH revenue was 1.0 billion yuan, +17% year over year. Net profit attributable to mother was 660 million yuan in Q1, down from 990 million yuan in 2023Q1. This was due to the sale of Accor shares in the same period last year, bringing investment income of 510 million yuan. In actual comparable terms, net profit to mother was +38% year-on-year, and operating profit was +51% year-on-year. Among them, Huazhu achieved net profit of 830 million yuan, +20% year-on-year on a comparable scale; the DH portion achieved a net loss of 170 million yuan, an even increase over the same period last year. A single Q4 achieved adjusted EBITDA of 1.4 billion yuan, +40% year-on-year under comparable caliber.
Net store opening accelerated, and room volume growth increased marginally: by the end of 2024Q1, the total number of Huazhu stores reached 9,684, of which high-end brands accounted for 47% and franchise stores accounted for 94%; the number of reserve stores was 3,138. Huazhu opened 569 new stores in a single quarter, with a net opening of 421 stores. The company expects to open 1,800 stores for the whole year, with a net opening of 1,150. The net opening of Q1 stores exceeded expectations. As of the end of 2024Q1, Huazhu's housing volume was 929,000, yoy +17%, including 843,000 franchised rooms, yoy +19.5%, 85,000 directly-managed units, and yoy -3%. In terms of housing volume, due to a decrease in the number of store closures, net store openings accelerated, and a marginal increase in the housing volume growth rate was achieved.
RevPAR is under pressure from a high base, leading to 7-11% revenue growth rate: Q1's RevPar was 216 yuan, +3% year over year; under high base, the year-on-year growth rate was under pressure; of these, housing prices were 280 yuan, +1% year over year, and occupancy rate was 77.2%, +1.6 pct year over year. The 2024 Q2 revenue guideline is 7-11% year-on-year, and revenue growth in some mainland countries other than DH is 7-11% year-on-year.
Profit forecast and investment rating: As a leader in the hotel industry, Huazhu Group's brand, traffic and technology create competitive barriers, and management culture empowers business development. It bucked the trend and expanded during the pandemic, and the market pattern improved markedly. Based on the latest financial data, Huazhu Group's profit forecast was lowered. Net profit due to mother for 2024-2026 was 37.9/41.0/4.55 billion yuan, respectively (previous value was 42.2/45.5/4.90 billion yuan), corresponding to the PE valuation of 24/22/20 times, maintaining the “buy” rating.
Risk warning: Competition in the industry intensifies, store growth falls short of expectations, etc.