Core views:
The company issued a performance announcement: (1) 24Q2: revenue of 6.15 billion yuan/yoY +11.2% (slightly exceeding the previous guideline of 7%-11%), net profit of 1.07 billion yuan/yoY +5.1%, adjusted net profit of 1.25 billion yuan/yoY +16.9%. (2) 24H1: Revenue 11.43 billion yuan/YOY +14.1%, adjusted net profit 2.03 billion yuan/YOY +39.0%.
In 24Q2, domestic Occ performed better than ADR, and overseas volume and prices rose sharply. (1) Domestic: RP244 yuan/YoY -2%, ADR296 yuan/YoY -3%, Occ 82.6% /yoY+1pp; same store RP/ADR/OCC -3.6%/-4.1% /+0.4pp, respectively. (2) Overseas: RP82 EUR/YoY +5%, ADR120 EUR/YoY +3%, Occ 68.3% /YoY+1PP.
The efficiency advantages are further highlighted. 24Q2 rent/discount/consumables decreased by 1.9/0.9/0.7 pp and labor increased by 1.3 pp; sales/management rates increased by 0.4/1.2pp. The increase in management rates was mainly affected by the increase in equity incentive expenses. Under the combined influence, adjusted net interest rates still increased by 1 pp year on year.
The 10,000 store milestone was reached, and the store opening guidelines were raised. There was a net increase of 466 domestic hotels in 24Q2 (including 567 new ones) to 10,150, with a year-on-year acceleration (374 in 23Q2), which was basically the same compared to the previous month (569 in 24Q1); there were 3,294 hotels to open (including 3266 domestic), a net increase of 156 over 24Q1. The annual store opening guidelines have been raised from 1,800 to 2,200+. 24H1 has already opened 1,136 stores, which is 1,064 short of the annual target, and 1005 stores have been opened at 23H2. Combined with the current pace of opening stores and the signing situation, it is expected that it will not be very difficult to complete.
Profit forecasts and investment recommendations. The 24Q3 revenue growth guidelines with and without DH are 2%-5%, 1%-4%, respectively. The 23Q3 RP base is higher, but under relatively positive store development guidance, it is not expected to be difficult to complete. We expect net profit of 4.2/4.8/5.4 billion yuan for 24-26, with a 24-year PE valuation, corresponding to a reasonable value of HK$35.29 per share for Hong Kong stocks and $45.38 per share for US stocks, maintaining a “buy” rating. (1 USD=7.78 HKD=7.13 RMB)
Risk warning. Macroeconomic fluctuations; industry competition intensified; store expansion fell short of expectations.