According to the research report of HSBC, with China's average room revenue (RevPAR) cycle quickly reaching its peak and the rapid recovery of hotel supply, H World Group's Legacy-Huazhu business growth momentum has shifted to expansion. Its improving balance sheet and light asset expansion may further enhance shareholder returns.

Although H World Group's RevPAR has dropped by single digits year-on-year since July, the group has raised its expansion target from 1,800 Legacy-Huazhu hotels to 2,200 this year. The bank believes that the faster expansion rate can offset the decline in RevPAR in the third quarter. In addition, the group recently announced a total shareholder return of 2 billion USD over 3 years and increased its dividend policy from the previous 45% to no less than 60%. In the first half of the year, the group's repurchases and dividend returns accounted for 141% of its net profit, and the second-quarter performance also met the bank's expectations.

HSBC research indicates that a slowdown in RevPAR trends will limit valuation. H World Group's year-on-year revenue and adjusted EBITDA growth rates slowed from 18% and 32% in the first quarter to 11% and 14% in the second quarter. The bank expects the group's growth to further slow to 7% and 12% in the second half of the year. The bank has also lowered its net profit forecasts for the group in 2025 and 2026 by 4% and 4.8% respectively, while raising its revenue forecasts by 1.1% and 0.8%. The target price has been lowered from 36.19 yuan to 32.6 yuan, maintaining a "buy" rating.