The current situation of the company
Jinjiang Co., Ltd. announced hotel operation data for August 2018:
Domestic hotels: 1) Comprehensive RevPAR increased by 6.1% year on year (economical / mid-range:
+ 0.4% Universe 1.2%), mainly benefiting from the upgrading of the product grade structure, that is, the proportion of mid-range hotel rooms with higher RevPAR significantly increased by 10 percentage points to 38% from 28% in August 17. 2) Occ fell 3% to 87%, while ADR increased 9% to RMB215. The rise in RevPAR is mainly driven by ADR, which is a common performance of economy and mid-range hotels.
Overseas hotels: comprehensive RevPAR increased by 0.1% year-on-year (economical / mid-range:
-0.6% Universe 2.3%), Occ rose 2%, ADR fell 2%.
Number of stores: by the end of August 2018, the number of hotels opened by the company reached 7120, with a net opening of 52 in August. A total of 10367 hotels have been signed, with a net increase of 106in August.
Comment
1) after a slowdown in RevPAR growth in July (4.0%), RevPAR growth rebounded in August, but we should still pay close attention to the macroeconomic trend, which will have a significant impact on the closely related hotel industry if the macro-economy enters a downward cycle. 2) the company's 2017 single-room profit (RMB 137000) is 39% and 75% of that of Huazhu and Home respectively, which has a lot of room for improvement. As this year's economic upgrading and transformation and more mid-range layouts go through the climbing period, it is expected to improve profitability. 3) China International Import Expo's holding in Shanghai in November can contribute to the annual performance.
Valuation proposal
We keep our 19-year profit forecast 1.065 billion / 1.36 billion unchanged in 2018. At present, the A-share price of the company corresponds to the price-to-earnings ratio of 2018 Maxima, which is 23 times earnings in 1919. We maintain the recommended rating and the target price of A / B shares of 32.66 yuan / US $2.67, which is 29.6% of the current share price and 22.3% upside of the current share price. The target price of A / B shares is based on the price-to-earnings ratio of 23 / 12 times 2019 respectively.
Risk
The macroeconomic environment changes; the supply growth of the hotel industry is higher than expected.