According to the financial news app Zhitong Finance, CICC issued a research report stating that it maintains a "outperform" rating for Shangri-La Asia (00069). Considering the cost increases from new project openings and employee recruitment, it revised its 2024/2025 EBITDA (including joint venture companies) downward by 14%/15% to $0.812/$0.843 billion. Based on the downward shift in industry valuation, the target price was lowered by 16% to HKD 6.3. The company's 1H24 performance was slightly lower than the bank's expectations.

CICC's main points are as follows:

In 1H24, RevPAR in mainland China decreased by approximately 1%.

In the first half of the year, overall RevPAR increased by approximately 1% (recovering to about 95% of the same period in 2019), while RevPAR in mainland China decreased by approximately 1% (OCC increased by 1 ppt, ADR decreased by 2%), recovering to about 90% of the same period in 2019. The performance of different city tiers in China in 1H showed some differentiation: RevPAR in first-tier cities increased by approximately 3% (OCC increased by 2 ppt, ADR remained almost flat), mainly due to the continuous recovery of inbound tourists (according to the statistics of the National Immigration Administration, the number of inbound foreigners at all ports in 1H increased by 152.7% to about 14.635 million people, recovering to about 61% of the same period in 2019; the China Tourism Research Institute predicts that the number of inbound foreign tourists in 2024 may recover to more than 80% of 2019); RevPAR in second-tier cities remained flat, while RevPAR in third and fourth-tier cities declined by approximately 6% (OCC increased by 1 ppt, ADR decreased by approximately 10%) due to the higher base, diversion of outbound tourism, and other factors. At the same time, the company mentioned that Chinese outbound tourism may bring growth to Southeast Asia and other regions, and it is recommended to pay attention to the two-way catalyst brought by the recovery of inbound and outbound travel in the second half of the year.

The RGI (Revenue Generating Index) shows that the company's operation is better than its peers. Pay attention to the new dual-brand expansion model.

1) According to STR data, the company's own hotel RGI (Revenue Generating Index) in 1H24 was 102.3, and in mainland China it was 107.3, indicating a better operational performance compared to other hotels in the same market and category. 2) The JEN Hotel in Kunming opened in April, adopting a dual-brand model, with approximately 80% of the rooms being JEN brand and 20% being Shangri-La brand (planned to open in 2025). In addition, the Hongqiao Airport project also plans to use a dual-brand strategy (Shangri-La brand and Trader brand), and the company plans to open it around the end of 2024. It is recommended to pay attention to the operational effectiveness of the new dual-brand expansion model.

Risk

The recovery of consumer power is not as expected; the recovery of inbound and outbound is not as expected; the progress of ongoing construction projects is not as expected.