1Q24 results slightly exceeded our expectations
First Travel Hotel announced 1Q24 results. 1) Financial data: 1Q24 achieved revenue of 1,845 billion yuan, +11.47% year over year (including hotel business revenue of 1,639 million yuan, +11.54% year on year; scenic spot operating business revenue of 206 million yuan, +10.90% year over year); net profit after deducting net income from non-return mother was 97 million yuan, +102.19% year on year. Overall performance slightly exceeded our expectations, mainly benefiting from the improvement of RevPAR and the continuation of the scenic area business boom brought about by the optimization of the store structure. 2) Operating performance: The overall RevPAR for all hotels in 1Q24 increased by 0.1% (ADR increased 1.4%; OCC decreased by 0.8ppt); 1Q24 opened 205 new stores, closed 173 stores, and net opened 32 stores. By the end of the first quarter, the number of hotels operated by the company reached 6,295, and the number of reserve stores reached 1,940.
Development trends
RevPAR for all hotels, excluding light management, increased by 2% in the first quarter, focusing on May Day leisure demand performance.
The overall RevPAR for all hotels in 1Q24 increased slightly by 0.1% year over year, including all hotels without light management increased 2% year over year (ADR increased 2.2% year over year; OCC fell 0.1ppt year on year); direct hotel business performance was good in the first quarter (direct-run store RevPar increased 7.7% year over year), mainly due to companies continuing to renovate direct-run stores and shut down some stores that did not meet performance standards in recent years. Looking ahead, the company said that based on the current traffic situation, the overall performance of the May Day holiday this year may be close to 23. We recommend continuing to monitor the release of leisure demand during the May Day holiday and the recovery trend of business travel demand after the holiday season.
Continue to strengthen standard brands and promote product structural optimization. 1) Switch stores: 205 new stores were opened in 1Q24, nearly the same as the previous year (1Q 23:210). The company is continuing to implement the standard brand strategy. Looking at the 1Q24 new store structure, the number of new stores opened by economical, mid-range and above increased by about 40%, accounting for about 50% of the total number of new stores opened in 1Q24 (4Q23:43%; 1Q 23:35%), while light management and the number of other stores opened decreased by about 25%. 173 stores closed in the first quarter (4Q23:319; 1Q23:
192 companies), of which lightweight management and economical products such as Home 1.0 account for 67%. 2) Reserve stores:
By the end of the first quarter, the company had 1,940 stores, with standard brands increasing 4.7ppt month-on-month.
We believe that the continuous increase in the share of standard brands may promote the continuous improvement of the company's overall RevPAR and revenue performance. It is recommended to pay attention to the structural changes in the subsequent opening of stores and the increase in the share of standard brands.
The economy continues to upgrade and iterate; continuously increase the mid-range and above markets. 1) The company upgraded economical products by launching a new version (launch of Home 4.0 in 1Q24) and refurbishing old stores. By the end of the first quarter, Rujia NEO 3.0 and above accounted for 61% of Rujia brands (43/50/ 59% at the end of 21/22/23, respectively). 2) The company is deeply involved in the mid-range and above markets, accounting for about 40.2% of the mid-range and above hotel room volume as of 1Q24; as of the first quarter, the core brands of mid-range and above (2 major mid-range brands: such as Home Business Travel and Home Choice; 4 major middle and high-end brands: Yimen, Heyi, Puyin, and Door Lai) were operating 1,408 stores, with 409 stores in reserve. It is recommended to continue to pay attention to the subsequent opening pace and operating performance of core brands such as Yifei.
Profit forecasting and valuation
We keep our profit forecast for 2024/25 unchanged, and maintain our outperforming industry rating and target price of 18 yuan, corresponding to 22/20x 2024/25e P/E and 15% upward space. The current stock price corresponds to 19/17x2024/25e P/E.
risks
RevPar's recovery fell short of expectations due to weak consumption power or increased supply; scale expansion fell short of expectations.