Jinjiang Hotel released three quarterly reports: Q3 achieved revenue of 3.898 billion yuan (yoy -7.10%, qoq +5.77%), net profit of 0.258 billion yuan (yoy -43.08%, qoq -60.76%), and Q3 net profit margin of 6.62% (yoy-4.25pct). Q1-Q3 2024 achieved revenue of 10.79 billion yuan (yoy -2.55%), net profit of 1.106 billion yuan (yoy +12.13%), deducting non-net profit of 0.639 billion yuan (yoy -20.39%). The 3Q domestic market was affected by the high year-on-year base and the general business travel environment. RP in the limited service sector was -8.4% year-on-year, and operations were under relative pressure. We expect the decline to narrow month-on-month after the 4Q base is digested. Based on the medium to long term, the company is steadily advancing a new round of state-owned enterprise reform, and issued the first equity incentive plan to inject development momentum into the reform team.

We look forward to a gradual improvement in operational quality and management efficiency, and are optimistic about the profitability improvements brought about by CRS channel revenue growth, direct product transformation and upgrading, and overseas asset structure optimization. Maintain a “buy” rating.

Domestic RevPAR was under pressure in 3Q24, and overseas losses decreased year-on-year

3Q24 hotels achieved revenue of 3.839 billion/yoy -7.07%, of which domestic revenue was 2.588 billion/yoy -10.88%, accounting for 67.41%, mainly due to lackluster domestic business travel demand; overseas revenue of 1.251 billion/yoy +1.93%, driven by the Paris Olympics in France. Looking at the business situation, 3Q24 domestic limited-service hotels RP/ADR/OCC were -8.4%/-10.5% /+1.7pct, including economical RP/ADR/OCC -4.7%/-6.3% /+1.1pct, mid-range RP/ADR/OCC YoY ratio -10.8%/-12.6% /+1.5pct, hotel supply compensation, and room prices returned to rationality year on year. The occupancy rate continued to grow across the board, showing to some extent the resilience of demand during the peak summer leisure season. 3Q24 Overseas RP/ADR/OCC YoY +3.1%/+6.3%/-2.0pct, +9.7%/+7.7% /+1.2pct YoY.

Direct stores continue to be renovated and optimized, and the store structure continues to be optimized

As of 3Q24, the company had 13,186 hotels, 469 newly opened, and 248, with a total of 1,149 new hotels (close to the target of 1200 householes/year) and 3,986 stores in reserve. 12,007 domestic households/252 net open stores; 1,179 overseas hotels and 4 net customs stores. The company continues to optimize direct-run stores, close 18 3Q direct-run stores, and upgrade the stock of direct-run stores. Looking at the structure, the number of budget/midrange/high star hotels in Jinjiang reached 39.7/59.6/ 0.6%, compared to -0.6/+0.5/+0.2pct. The share of mid-range contributions increased. The company released the “12+3+1" brand development strategy, based on multi-link development, with positive growth trends for brands such as 1-3Q24 Lifeng and Hilton Hampton. 3Q24's sales/management expenses ratio was 8.2/ 18.0%, compared with +0.8/+0.23pct, mainly due to the reclassification of OTA fee entry categories.

Focusing on the release of efficiency momentum driven by organizational reforms & equity incentives, maintaining “buying” and considering the domestic business travel environment, there is still no obvious inflection point in the short term. We expect the EPS for 24/25/26 to be 1.13/1.20/1.46 yuan (previous value: 1.26/1.42/1.67 yuan), with a target price of 30.00 yuan, corresponding to 25X 25 PE (comparable to Wind and Bloomberg in '25), where the average PE value is 23X, leading the company size and efficiency expectations to boost valuations and give prices). Maintain “buy-in.”

Risk warning: Risk of demand falling short of expectations; market competition increases risk.