Looking forward to 2H24, the summer holiday travel is bullish for the sector, and the leading companies have taken measures and further strengthened their cost management capabilities. With the help of the peak season, the profitability elasticity is expected to be further released. In terms of product structure, the operating income of the 10-30 billion yuan products are 401/1288/60 million yuan, respectively.
According to the Futu Wealth Management App, since 2024, the social service sector has been affected by factors such as the high base of the same period in 2023, consumer expectations, and intensified supply competition, resulting in relatively flat operating performance and stable leading indicators. In 1H24, the recovery of demand was insufficient, the unit price per customer fell year-on-year, and same-store operating performance was under pressure, causing the company's operations to weaken compared to the previous period. In terms of structure, leisure-related sectors are better than business travel, and demand growth still exists in sinking and overseas markets. Looking forward to 2H24, the bullishness of the block's prosperity is expected to rebound during the summer vacation, and the leading companies have taken measures and further strengthened their cost management capabilities. With the help of the peak season, the profitability elasticity is expected to be further released. Relatively bullish on the three main lines of cost-performance ratio, brand-going global, and silver-hair economy.
It is recommended to pay attention to the leading symbols with better stability of demand and stronger anti-cyclicality, and to recommend Techsea International (09658), Haidilao (06862), Yum China (09987), Dashen Shares (01405), H World Group (01179), YATU (ATAT.US), Jinjiang (600754.SH), China Tourism Group Duty Free Corporation (01880), and Songcheng Performance Development (300144.SZ).
Here are the main points of HuaTai Securities:
Hotels: Demand is stable, and RP growth in 2Q may be under pressure, with a slight improvement in expectations.
According to HotelHome, the RP of hotels in January to June 2024 has recovered to 84/91/85/90/88/87% of the same period in 2019. Due to the high base of the same period in 2023, RP has decreased by -2/-10/-11/-16/-7/-11% year-on-year. By category, the RP of China's economy hotels in 1H24 has recovered to 97% of the same period in 2019, which is better than the mid-to-high-end hotels of 93/84%. Huatai Securities believes that considering the country's leading hotel groups focusing on economy and mid-range services, demand resilience is relatively better under the advantage of cost-effectiveness, and it is expected that Huazhu/Jinjiang/Shoulu/Yatu 2Q24 RP will all have a low single-digit to high single-digit decrease year-on-year. With the arrival of the summer peak season, accommodation is a necessary part of the trip, which is expected to drive the improvement of 3Q hotel RP compared to the previous period and offset the pressure of weak demand for business travel. In terms of costs, the leading companies are actively reducing costs and increasing efficiency, and their profit-making ability may be improved compared to the previous period. Overseas interest rates remain high, suppressing the net income of Huazhu/Jinjiang.
Catering: The unit price per customer continued to adjust in 1H24, and same-store sales and profitability were under pressure.
According to the National Bureau of Statistics, from January to May 2024, national social retail and catering revenue increased by +12.5/6.9/4.4/5.0% year-on-year, and the industry growth rate slowed down. Most brand stores are under pressure to increase volume by lowering prices. According to company announcements, in 1Q24, same-store sales for Tai'er Hotpot, Suancai Hotpot, and 九毛九 decreased year-on-year by -13.9/-34.8/-4.1%; KFC/Pizza Hut same-store sales decreased by -2/-5%, and the single quantity increased year-on-year by +4/+8%. Benefiting from operational improvements and demand stability, it is expected that in 1H24, Dashen Shares and Techsea International same-store sales will record positive growth, and Haidilao's table flip rate is expected to achieve double-digit growth year-on-year. In addition, multiple factors such as pricing adjustments, rising labor costs, high operating leverage of self-operated stores, and new store climbing may cause slight pressure on the leading companies' profit margin. It is recommended to pay attention to same-store performance after the return of 2H base period to rationality.
Duty-free: Passenger flow has gradually recovered, airport rental deduction optimization, and profit margins are expected to stabilize and rebound.
According to the Haikou Customs, under the influence of high base, the sales and per capita consumption of duty-free goods on outlying islands in January-May 2024 were 16.91 billion yuan/5,629 yuan, a decrease of -29.6/-22.0% from the same period in 2023. Influenced by the separation of inbound and outbound flows and the need to improve residents' consumer willingness, the conversion rate and unit price per customer for duty-free goods on outlying islands are under pressure. The port passenger flow has gradually recovered, and in 1-5M24, the international and regional passenger throughput of Pudong/Beijing Capital International Airport has recovered to 75.1/48.8% of the same period in 2019. The supplementary rental agreement is expected to contribute to performance growth, and it is expected that in 1H24, China Tourism Group Duty Free Corporation's revenue/mother's net profit will decrease by -11~-15%/-6~-10% year-on-year. Looking forward to 2H24, the recovery of inbound and outbound passenger flows will drive the recovery of duty-free sales at ports, consumption tax reform may be promoted, and the cost-effectiveness advantage of duty-free channels may be slightly boosted.
Scenic spots: The holiday effect is obvious, and the number of visitors has recovered better than revenue.
In the first half of 2024, the popularity of tourism continued, and the number of visitors during holidays recovered better than revenue. Scenic spots have different performances in terms of visitor recovery, with Emei Mountain/Huangshan/Changbai Mountain having a 1Q24 visitor volume decrease year-on-year of -0.1/-2.1/+138%. The recovery of performances in theater shows and visitor volume will help the restoration of scenic spot operations, and the overall revenue of the scenic spot sector in 1Q24 has recovered to 88% of the same period in 2019, up by 14 percentage points compared to 1Q23. It is recommended to pay attention to traffic improvement, increased visitors brought by new projects, and improved profits.
Risk Warning: Decreased willingness of residents to consume and intensified market competition.