Description of the event
In the first quarter of 2024, the company achieved operating income of 1,845 billion yuan, an increase of 11.47% over the previous year, and realized net profit of 121 million yuan, an increase of 49.83% over the previous year.
Incident comments
Two-wheel drive growth in hotels and scenic spots. By business, as demand for business travel and leisure tourism continues to be released, the company's hotel business achieved revenue of 1,639 billion yuan, up 11.54% year on year, and total profit of 51.812,700 yuan, up 649.82% year on year, which is the main source of the company's performance growth. The number of visitors to the company's Nanshan Scenic Area in the first quarter was 2.47 million, a record high of 17.3% year on year. Driven by the increase in the number of people, the scenic area operation business achieved revenue of 206 million yuan, an increase of 10.90% year on year, and total profit of 122 million yuan. 5.65% increase.
Product structure upgrade, ADR drives RevPAR growth. In terms of operation, the company's total hotel RevPAR in the first quarter was 131 yuan, up 0.1% year on year, down 4.4% from the same period in 2019. Looking at the split, ADR was 217 yuan, up 1.4% year on year, up 21.2% from the same period in 2019, and OCC was 60.1%, down 0.8 pct year on year, down 16.6 pct from the same period in 2019. The separation of the company's operating volume and price is related to product restructuring. The proportion of the company's middle and high-end hotels rose from 18.2% in 2019Q1 to 28.2% in 2024Q1, and the product structure upgrade led to continuous growth in ADR.
Costs need to be optimized, and profit performance is impressive. In terms of profitability, benefiting from the recovery in demand and ADR growth, the company's net interest rate for the first quarter was 7.25%, up 1.54 pct year on year; the cost ratio for the period was 27.57%, up 2.32pct year on year. Among them, sales, management, finance, and R&D expenses rates were 8.22%/13.35%/5.23%/0.77%, respectively, +2.44/+1.33/-1.26/+0.01pct. As the operating efficiency of newly opened hotels increases, sales and management expense ratios are expected to be diluted.
Store quantity and quality are combined to enhance the company's brand strength. In terms of opening stores, the company opened 205 new stores in the first quarter. In terms of classification, there were 36 budget hotels and 66 mid-range and high-end hotels, up 50.0% year on year, accounting for 32.2% of the total number of new stores, up 11.2pct from year to year, with light management. As of March 31, the company's share of mid-range and high-end hotel rooms had increased to 40.2%; in terms of business methods, the company had 2 direct stores and 203 franchisees in the first quarter. The company continued to expand rapidly through franchise. As of March 31, the company had signed a total of 6,295 hotels (2 overseas). The total number of stores is 1940. In addition, during the reporting period, the company officially launched the Home Inn 4.0 product, which strengthened the renewal and iteration of the hotel brand and further enhanced the company's brand power.
Investment advice and profit forecast: Looking ahead, the hotel industry is expected to usher in steady growth with the steady recovery of the economy and the gradual increase in the willingness of franchisees to invest. The company still has plenty of room to expand in high-end hotels in the sinking market. High-stock stores have laid a solid foundation for new store development. Continued iterative upgrades of products such as NEO are expected to further enhance the brand image. Net profit due to mother in 2024-2026 is estimated to be $946, 10.79, and 1.06 billion, respectively, and corresponding PE is 17.80, 15.61, and 13.97 times, maintaining a “buy” rating.
Risk warning
1. The economy is recovering slowly, and demand growth falls short of expectations;
2. New supply-side store openings have increased, and industry competition has increased risks; 3. Cultivating new brands and opening stores fall short of expectations.