Event Overview: 24H1 revenue recovery was 96%, and performance was in line with expectations

24H1 achieved revenue of 6.892 billion yuan/yoy +0.23%, recovering to 96% in the same period in '19; net profit of 0.848 billion yuan/yoy +59%, recovering 149% from 19H1 (performance forecast is 8.0 to 0.85 billion yuan); net profit after deducting non-return to mother 0.389 billion yuan/yoy +4%, recovering 108% from 19H1 (performance forecast is 3.7 to 0.4 billion yuan). Non-recurring profit and loss mainly comes from the investment income (0.421 billion yuan) obtained by disposing of 100% of Fashion Tour's shares and government subsidies.

24Q2 achieved revenue of 3.686 billion yuan/yoy -5%, recovering to 97% in the same period in '19; of these, domestic hotel revenue was 2.517 billion yuan/yoy -4%, recovering to 95% in the same period in '19, and overseas revenue of 1.109 billion yuan/yoy -7%, recovering to 102% in the same period in '19. Net profit from 24Q2 was 0.658 billion yuan/yoy +67%, with a recovery rate of 241% compared to 19Q2; net profit without return to mother 0.326 billion yuan/yoy +16%, compared to 19Q2.

Domestic and foreign brand split: domestic profits declined year-on-year, and overseas Louvre reduced losses

24H1 domestic/overseas hotel equity net profit of 0.443/-0.074 billion yuan, 23H1 was profit of 0.558 billion yuan/loss 0.192 billion yuan, and 19H1 was profit of 0.511/0.065 billion yuan (note: this caliber is directly summed by subsidiaries, slightly deviates from the final summary but is consistent with the trend), in addition to the impact of catering and other businesses and headquarters.

Among them: 1) Domestic: 24H1 Botao's revenue was 1.814 billion yuan/yoy +4%, recovering to 87% in the same period in '19, and net profit of 0.318 billion yuan/yoy +9%, recovering to 110% in the same period in '19; Vienna's revenue of 1.799 billion yuan/yoy +4%, recovering to 123% in the same period in '19, and net profit of 0.291 billion yuan/yoy -10%, recovering to 211% in the same period in '19 (subject to return to mother with 90% shareholding ratio); Jinjiang's revenue was 0.936 billion yuan/yoy -3%, recovering to 73% in the same period in '19, with a net loss of 0.137 billion yuan; 23H1 was a loss of 0.024 billion yuan and 19H1 profit of 0.097 billion yuan; 2) Overseas: Louvre's revenue of 0.26 billion EUR/YOY -4% recovered to 101% in the same period in '19, with a net loss of 9.49 million euros, and 23H1 lost 25.45 million euros. 19H1 made a profit of 8.09 million euros.

On the RevPAR side: High base impact, domestic/overseas recovery rates dropped to 101%/110%, respectively

The overall RevPAR in 24Q2 was 162.36 yuan/yoy -7%, recovering to 101% in the same period in 2019 (compared with the overall recovery rate of 119% in Huazhu in 24Q2); among them, ADR 249.86 yuan/yoy -2%, recovery was 119%, Occ 64.98% /yoy-4pct, down 11 pct from 19Q2.

Looking at the structure, the middle and high-end RevPAR is 180.26 yuan/yoy -10%, the recovery rate is 87%, the economical RevPAR 112.96 yuan/yoy -5%, and the recovery rate is 96%;

In 24Q2, the overall overseas RevPAR was 43.36 euros/yoy -1%, recovering to 110% in the same period in '19 (about 116% recovery compared to China Residence), with ADR 67.81 euros/yoy +2%, recovery rate 118%, Occ 63.94% /yoy-2pct, down 4 pct from 19Q2.

In terms of opening stores: The year-on-year increase in new and net store openings, leading the industry in the number of mid-range and above guest rooms

In 24Q2, 458 new homes/yoy were opened +17%, with a net increase of 343 households/yoy +27%, including 40 fewer direct businesses and 444 more franchises (compared with 572 new homes opened by Huazhu, yoy +53%, net 469 businesses);

By structure, the net increase in the number of middle- and high-end stores opened in 24Q2 was 79%; by the end of 24Q2, the company had opened 12,938 hotels, of which the middle and high-end rooms accounted for 67% (compared to 56% of Huazhu).

The company announced the 2024 semi-annual profit distribution plan. It plans to distribute a cash dividend of 1.2 yuan (tax included) for every 10 shares to all shareholders, for a total distribution of no more than 0.127 billion yuan. The cash distribution ratio accounted for 34% of undistributed profits at the end of the period, and the dividend rate (for the past 12 months) reached 2.07%.

Profit forecast and investment suggestions: We expect the company's 24-26 revenue to be 14.7/15.7/16.6 billion yuan, yoy +0.4%/6.5%/6.0%, net profit due to mother of 1.5/1.5/1.9 billion yuan, yoy 49.9%/0.4%/23.6%, and PE corresponding to the current stock price is 17/17/14x, respectively. Follow the pace of release of business travel demand, follow the company's overseas debt structure optimization, direct-run store upgrade and CRS fee progress, and maintain the “recommendation” ratings.

Risk warning: risk of macroeconomic fluctuations, risk of business travel demand falling short of expectations, risk of central reservation fee collection falling short of expected risk.