First Travel Hotels released its 2024 three-quarter report. In the first three quarters of 2024, the company's revenue was 5.889 billion yuan/YoY -0.37%, net profit to mother: 0.723 billion yuan/YoY +5.63%, net profit not attributable to mother 0.661 billion yuan/YoY +5.77%; sales expense ratio 7.14% /yoy +0.87pcts, management expense ratio 10.85% /YoY -0.43pcts, R&D expense ratio: 0.82% /y-o-y -0.01pcts, financial expense ratio 4.60% /YoY- 0.68pcts; gross profit margin 39.59% /year over year -0.15pcts, net profit margin to mother 12.28% /year over year +0.70pcts.

In the third quarter of 2024, the company's revenue was 2.156 billion yuan/year on year -6.38%, net profit to mother 0.366 billion yuan/-9.54% year on year, after deducting non-return net profit of 0.338 billion yuan/year on year -13.75%; sales expense ratio 7.20%/year on year +1.27 pcts, management expense ratio 9.04% /year on year -1.57 pcts, R&D expense ratio of 0.74% /year on year +0.02 pcts; gross profit margin of 43.0 /y-2.33 pcts , net profit margin 16.96%/year-over-year -0.59pcts.

The pressure on results for the third quarter of '24 may be due to the high performance base brought about by the high level of ADR for the same period in '23.

The trend of high-speed store opening continues, product iteration continues to gain strength, and standard stores account for more than 60% of new stores for the first time.

In the third quarter of 2024, the company opened 385 new stores and 273 net stores, including 232 new standard brands and 158 net stores, accounting for 60.3% of the total number of new stores, +18.4pcts; 2) Among the new standard brand stores, 90 new budget hotels opened 90/year over year +91.5% (benefiting from the iterative launch of new products at Home 4.0), 142 new mid-range and high-end hotels opened 142/year over year. As of the end of the third quarter of 2024, the number of the company's budget hotels/ middle and high-end hotels/ light management hotels/ other hotels was 1913/1967/2852/16 respectively, of which 354/257/2 directly-managed stores in budget hotels, middle and high-end hotels, and other hotels were franchised stores. In the first three quarters of 2024, the company opened a total of 952 new hotels, +10.31% year-on-year, including 942 franchised stores; as of September 30, the number of reserve stores was 1,876, of which 1,869 were franchised stores.

RevPAR/ADR declined significantly in the third quarter of '24, and the decline in non-light management stores was relatively low.

In the third quarter of 2024, the total hotel RevPAR was 170 yuan, -7.8% year over year; all hotels without light management stores were 195 yuan, -6.0% year over year; total hotel ADR was 244 yuan/year over year -5.5%; total hotel ADR without light management stores was 264 yuan/4.7% year on year; all hotel OCC was 69.7% /year on year -1.8 pcts, and all hotels without light management stores had OCC of 73.9% /year over year -1.0pcts.

Investment advice: In response to business uncertainty in the general environment, the company strives to reduce costs and improve efficiency, and continuously consolidates internal skills, continuously consolidates long-term barriers through product iteration/membership system improvement, and lays the foundation for medium- to long-term development. The company's net profit for 2024-2026 is expected to be 0.887/0.97/1.025 billion yuan, respectively, and the corresponding PE is 17x/16x/15x, respectively, maintaining the “recommended” rating.

Risk warning: The risk of macroeconomic fluctuations, falling short of expectations when opening a store, and the competitive landscape deteriorates.