Investment Rating - Maintain "Buy" rating for the company [2][4] Core Views - The company maintains a positive store expansion pace, focusing on mid-to-high-end brands, increasing penetration in lower-tier cities, and enhancing business travel cooperation and member loyalty [4] - Domestic RevPAR is under pressure due to a high base effect from the previous year, with OCC showing resilience but ADR declining significantly [4] - The company expects 2024E/2025E/2026E revenues of 23.7/25.8/28.0 billion RMB, with YoY growth of 8.2%/9.1%/8.3%, and net profits of 3.7/4.4/4.8 billion RMB, with YoY changes of -9.3%/+17.4%/+11.2% [4] - The current stock price corresponds to 2024E/2025E/2026E P/E ratios of 19/16/15x [4] Financial Performance - 2024Q3 revenue reached 6.44 billion RMB, up 2.4% YoY, with domestic self-operated, domestic franchised, overseas self-operated, and overseas franchised revenues at 2.461, 2.568, 1.229, and 0.034 billion RMB, respectively [4] - Adjusted EBITDA for 2024Q3 was 2.11 billion RMB, down 9.5% YoY, with domestic and overseas segments contributing 2.09 and 0.02 billion RMB, respectively [4] - Adjusted EBITDA margin was 32.8%, down 4.3 ppts YoY and 0.4 ppts QoQ [4] - Adjusted net profit was 1.37 billion RMB, down 10.8% YoY [4] Operational Metrics - Domestic RevPAR, ADR, and OCC for 2024Q3 were 256 RMB, 301 RMB, and 84.9%, down 8.1%, 7.0%, and 1.0 ppts YoY, respectively [4] - Overseas RevPAR, ADR, and OCC for 2024Q3 were 82 EUR, 117 EUR, and 69.8%, up 3.7%, 2.5%, and 0.8 ppts YoY, respectively [4] - The company opened 790 new domestic stores in 2024Q3, with the full-year store opening guidance raised from 2,200 to 2,400 stores [4] - Total store count reached 10,845 by the end of 2024Q3, with over 800 new contracts signed during the quarter [4] Financial Projections - 2024E/2025E/2026E revenues are projected at 23.7/25.8/28.0 billion RMB, with YoY growth of 8.2%/9.1%/8.3% [5] - 2024E/2025E/2026E net profits are projected at 3.7/4.4/4.8 billion RMB, with YoY changes of -9.3%/+17.4%/+11.2% [5] - 2024E/2025E/2026E EBITDA is projected at 6.78/7.51/8.17 billion RMB, with YoY changes of -0.8%/+10.8%/+8.7% [5] - 2024E/2025E/2026E EPS is projected at 1.16/1.37/1.52 RMB [5]

Investment Rating - Buy (Maintained) [7] Core Views - The company's Q3 2024 performance was largely in line with expectations, with revenue reaching RMB 6.442 billion, a YoY increase of 2.45%, within the guidance range of 2%-5% [2] - Domestic RevPAR declined due to a high base effect, with ADR having a greater impact, while overseas operational indicators remained stable [3] - The company continues to expand its hotel network and upgrade its products, raising its full-year store opening guidance to 2,400 stores (previously 2,200 stores) [4] - Operating costs and expenses increased YoY due to business expansion, but the company's performance remained largely in line with expectations [5] - The company emphasized its dividend and share repurchase plans to enhance shareholder returns, including a USD 1 billion share repurchase plan over five years [6] Financial Performance - Q3 2024 revenue: RMB 6.442 billion, up 2.45% YoY, with domestic revenue at RMB 5.162 billion (up 0.96% YoY) and overseas revenue at RMB 1.280 billion (up 8.94% YoY) [2] - Q3 2024 net profit attributable to shareholders: RMB 1.273 billion, down 4.79% YoY [2] - Domestic RevPAR: RMB 256, down 8.1% YoY, with ADR at RMB 301, down 7.0% YoY [3] - Overseas RevPAR: EUR 82, up 3.7% YoY, with ADR at EUR 117, up 2.5% YoY [3] Expansion and Operations - Q3 2024 domestic store openings: 774 new stores (3 directly operated, 771 franchised), with a net increase of 557 stores [4] - Pipeline: 2,899 stores in the domestic market, with 1,082 economy and 1,817 mid-to-high-end hotels [4] - The company is accelerating its store expansion, with a focus on upgrading its product offerings and optimizing its brand portfolio [4] Shareholder Returns - The company announced a 3-year shareholder return plan, including a maximum distribution of USD 2 billion and a USD 1 billion share repurchase plan over five years [6] - In the first three quarters of 2024, the company repurchased approximately USD 270 million worth of shares and returned approximately USD 470 million to shareholders through dividends and share repurchases [6] Future Outlook - The company expects Q4 2024 revenue growth of 1%-5% (excluding DH growth) [12] - Forecasted revenue for 2024-2026: RMB 23.774 billion, RMB 25.455 billion, and RMB 27.561 billion, with YoY growth rates of 8.6%, 7.1%, and 8.3%, respectively [12] - Forecasted net profit attributable to shareholders for 2024-2026: RMB 3.839 billion, RMB 4.524 billion, and RMB 5.134 billion, with YoY growth rates of -5.9%, 17.8%, and 13.5%, respectively [12] Financial Ratios - 2024E P/E: 20.1x, 2025E P/E: 17.1x, 2026E P/E: 15.0x [12] - 2024E P/B: 4.6x, 2025E P/B: 3.6x, 2026E P/B: 2.9x [13]

Group 1 - The core thesis for H World Group (NASDAQ: HTHT) is based on the robust domestic travel demand in China, positioning the company well to capture this opportunity [1] - The investment strategy focuses on identifying undervalued companies with long-term growth potential, emphasizing a blend of value investing principles and long-term growth [1] - The approach involves purchasing quality companies at a discount to their intrinsic value and holding them to allow for compounding of earnings and shareholder returns [1]

Investment Rating - The report maintains a "Buy" rating for the company, indicating a strong performance expectation relative to the market [7][10]. Core Insights - The company reported Q3 2024 earnings that met expectations, with a revenue of 6.4 billion yuan, reflecting a year-on-year increase of 2.4% [7]. - The company is actively expanding its hotel network while maintaining stable occupancy rates, with a domestic hotel RevPAR of 256 yuan, down 8.1% year-on-year [8]. - The company continues to penetrate lower-tier cities and has launched a new series of mid-to-high-end hotels, with a total of 10,845 operating hotels and a room count of 1.06 million [9]. - The company’s membership base has grown to 257 million, with a direct booking ratio of 64.2%, indicating increased customer loyalty [10]. - Future profit forecasts remain stable, with expected net profits of 4.087 billion, 4.555 billion, and 4.875 billion yuan for 2024, 2025, and 2026 respectively [10]. Financial Data and Earnings Forecast - Revenue projections show a steady increase from 23.347 billion yuan in 2023E to 26.345 billion yuan in 2025E, with a compound annual growth rate [6]. - The company’s gross margin is expected to stabilize around 34-35% from 2024E onwards [6][10]. - The net profit attributable to the parent company is projected to grow from 4.087 billion yuan in 2024E to 4.875 billion yuan in 2026E [10].

Investment Rating - The report maintains a "Buy" rating for Huazhu Group-S (01179 HK) and Huazhu (HTHT O) with a target price of HKD 36 01 per share for the Hong Kong-listed stock and USD 46 28 per ADS for the US-listed stock [5] Core Views - Huazhu Group reported Q3 2024 revenue of RMB 6 44 billion (+2 4% YoY) at the lower end of the guidance range Net profit attributable to shareholders was RMB 1 27 billion (-4 8% YoY) while adjusted net profit was RMB 1 37 billion (-10 8% YoY) [1] - For the first three quarters of 2024 the company achieved revenue of RMB 17 87 billion (+9 6% YoY) and net profit attributable to shareholders of RMB 3 00 billion (-10 3% YoY) Adjusted net profit for the period was RMB 3 40 billion (+13 4% YoY) [1] - Domestic RevPAR ADR and occupancy rates in Q3 2024 were RMB 256 (-8 1% YoY) RMB 301 (-7 0% YoY) and 84 9% (-1 0 pct YoY) respectively International RevPAR ADR and occupancy rates were EUR 82 (+3 7% YoY) EUR 117 (+2 5% YoY) and 69 8% (+0 8 pct YoY) respectively [1] - The company accelerated its domestic hotel openings with 774 new hotels in Q3 2024 (a record high) and a net increase of 557 hotels bringing the total domestic hotel count to 10 707 By the end of Q3 2024 the company had opened 1 910 hotels domestically achieving 87% of its annual target of 2 200+ hotels [1] Financial Performance - Operating costs increased to 59 0% (+1 5 pct YoY) in Q3 2024 mainly due to rising labor costs (21 3% +2 4 pct YoY) Sales expenses were 4 7% (+0 1 pct YoY) and management expenses were 10 4% (+1 9 pct YoY) Net profit margin attributable to shareholders was 19 8% (-1 5 pct YoY) while adjusted net profit margin was 21 3% (-3 2 pct YoY) [2] - Revenue growth guidance for Q4 2024 is 1%-5% (regardless of DH inclusion) The report forecasts net profit attributable to shareholders of RMB 3 7 billion RMB 4 5 billion and RMB 5 0 billion for 2024 2025 and 2026 respectively [2] Growth and Profitability - Revenue growth is projected at 7 9% 6 7% and 5 8% for 2024 2025 and 2026 respectively [3] - Net profit attributable to shareholders is expected to grow by 21 6% and 12 2% in 2025 and 2026 respectively [3] - ROE is forecasted at 23 1% 21 8% and 19 5% for 2024 2025 and 2026 respectively [3] Valuation - The report values Huazhu Group at 24x PE for 2025 corresponding to a fair value of HKD 36 01 per share for the Hong Kong-listed stock and USD 46 28 per ADS for the US-listed stock [2]

Investment Rating - Maintains a "Buy" rating for Huazhu Group (1179 HK/HTHT US) with an upward revision of the target price to HKD 32.9 for HK shares and USD 41.1 for US shares [2][3] Core Views - Huazhu Group's 3Q24 revenue reached RMB 6.4 billion, a YoY increase of 2.4%, with domestic revenue growing 1% and overseas revenue growing 8.9% [2] - Net profit attributable to shareholders in 3Q24 was RMB 1.27 billion, a YoY decline of 4.8%, impacted by one-off factors [2] - The company opened 790 new stores in 3Q24, setting a new quarterly record, with 774 net new stores in China and 16 overseas [2] - Domestic RevPAR in 3Q24 was RMB 256, a YoY decline of 8.1%, primarily due to high base effects from the previous year and adverse weather conditions [2] - Overseas business restructuring is expected to drive long-term high-quality growth, with one-time restructuring costs of RMB 81 million in 3Q24 [2] Financial Performance and Forecasts - Revenue for 2024E is projected at RMB 23.6 billion, with a YoY growth of 7.8%, while net profit attributable to shareholders is expected to be RMB 3.525 billion, a YoY decline of 13.7% [4] - Gross margin for 2024E is forecasted at 35.7%, with operating margin at 19.7% [4] - The company's PE ratio for 2024E is estimated at 22.1x for US shares and 22.0x for HK shares [4] Operational Metrics - Domestic ADR in 3Q24 was RMB 301, a YoY decline of 7%, while OCC remained relatively stable at 84.9%, down 1ppt YoY [15] - Overseas ADR in 3Q24 was USD 117, a YoY increase of 2.5%, with OCC at 69.8%, up 0.8ppt YoY [15] Market Valuation and Target Price - The target price for Huazhu Group's HK shares is set at HKD 32.9, representing a potential upside of 26.1% from the current price of HKD 26.1 [3] - The target price for Huazhu Group's US shares is set at USD 41.1, representing a potential upside of 24.2% from the current price of USD 33.1 [3] Industry Context - The hotel industry's valuation multiple has increased, leading to an upward revision of Huazhu Group's target price based on a 14x 2025E EV/EBITDA, a 20% discount compared to the average of international hotel groups [2]

Investment Rating - The report maintains a "Buy" rating for the company [1][16]. Core Views - The company reported Q3 2024 earnings with revenue of 6.44 billion CNY, a 2.4% increase year-on-year. Adjusted EBITDA was 2.13 billion CNY, down 2.7%, with an EBITDA margin of 33.0%, a decrease of 1.7 percentage points. Adjusted net profit was 1.37 billion CNY, down 10.8%, with an adjusted net profit margin of 21.3%, a decrease of 3.2 percentage points [1]. - Domestic RevPAR (Revenue per Available Room) for Q3 2024 was 256 CNY, down 8.1% year-on-year, while overseas RevPAR was 82 EUR, up 3.7% year-on-year. The report indicates that domestic revenue growth is slowing due to significant pressure on room rates [1]. - The company opened 790 new hotels in Q3, maintaining a high opening rate, and is on track to meet its annual target of 2,200 new openings [1]. Summary by Sections Financial Performance - Q3 2024 revenue was 6.44 billion CNY, with a growth rate of 2.4%. Adjusted net profit was 1.37 billion CNY, down 10.8% year-on-year. The adjusted EBITDA margin was 33.0% [1][4]. - The company expects Q4 2024 revenue growth of 1% to 5%, with RevPAR pressure expected to ease due to a high base effect and slowing industry supply growth [1]. Operational Metrics - Domestic RevPAR decreased by 8.1% to 256 CNY, with occupancy down 1.0 percentage points and ADR (Average Daily Rate) down 7.0%. In contrast, overseas RevPAR increased by 3.7% to 82 EUR [1]. - The company reported a significant increase in costs, particularly in labor, due to network expansion, with hotel operating costs at 59.0%, up 1.5 percentage points [1]. Future Outlook - The report projects adjusted net profits for 2024 to 2026 at 3.92 billion CNY, 4.47 billion CNY, and 5.06 billion CNY, respectively, with corresponding P/E ratios of 20.2, 17.7, and 15.6 [1][4]. - The company is focused on high-quality development and expanding its mid-to-high-end market presence while maintaining a strong growth trajectory in new hotel openings [1].

Investment Rating - Maintains an "Outperform" rating for Huazhu Group-S (1179 HK) [1][16] Core Views - Q3 2024 revenue increased slightly by 2 4% to RMB 6 44 billion, within the lower range of the guidance (2-5% growth) [1][7] - Adjusted net profit declined by 10 8% YoY to RMB 1 37 billion, and adjusted EBITDA decreased by 9 5% to RMB 2 11 billion, slightly below Bloomberg consensus estimates [1][7] - Domestic hotel RevPAR declined by 7 9% YoY to RMB 256, impacted by high base effects and weather disruptions [1][8] - Overseas hotel revenue grew by 8 9% YoY to RMB 1 28 billion, with a net loss of RMB 89 million due to restructuring costs [1][11] Domestic Hotel Operations - Domestic hotel RevPAR for mature stores decreased by 10 3% YoY to RMB 258, with ADR down 8 4% and occupancy rate down 1 8 percentage points [1][8] - 774 new hotels opened in Q3 2024, with a net increase of 557 hotels, bringing the total domestic hotel count to 10,707 by the end of Q3 2024 [1][8] - Domestic revenue grew by 1 0% YoY to RMB 5 162 billion, with franchised revenue up 14 7% and direct-operated revenue down 10 4% [1][8] Overseas Hotel Operations - Overseas DH RevPAR increased by 3 7% YoY, driven by a 2 5% increase in ADR and a 0 8 percentage point increase in occupancy rate [1][11] - The company exited 14 self-operated hotels in Denmark and fully took over the Zleep brand, with restructuring costs of RMB 81 million [1][11] Future Outlook - Q4 2024 revenue is expected to grow by 1-5%, with RevPAR expected to decline in the mid-single digits but with a narrowing YoY decline [1][12] - The company plans to accelerate its expansion in lower-tier cities, upgrade its mid-to-high-end hotel brands, and strengthen direct sales capabilities [1][12] - Overseas operations are expected to improve in 2025 due to ongoing asset-light optimization and operational enhancements [1][12] Financial Forecasts - Revenue for 2024E is projected at RMB 23 305 billion, with adjusted net profit of RMB 3 935 billion [4] - Adjusted EPS for 2024E is forecasted at RMB 1 23, with a PE ratio of 19 8x [4] - ROE is expected to be 25 2% in 2024E, with an EBIT margin of 16 9% [4]

Financial Data and Key Metrics Changes - Total turnover for Q3 2024 was RMB 26 billion, representing an 11% year-over-year increase, with Legacy-Huazhu's hotel turnover growing 11% year-over-year to RMB 24 billion [37] - Hotel revenue for the group increased 2.4% year-over-year to RMB 6.4 billion, while revenue from Legacy-Huazhu grew 1% year-over-year to RMB 5.2 billion [38] - Adjusted EBITDA decreased 9.5% year-over-year to RMB 2.1 billion, with Legacy-Huazhu's adjusted EBITDA down 7.5% year-over-year [44] Business Line Data and Key Metrics Changes - Legacy-Huazhu's RevPAR decreased 8.1% year-over-year to RMB 256, with ADR down 7% year-over-year to RMB 301 [10] - Revenue from Huazhu manachised and franchised hotels grew 14.7% year-over-year, driven by strong hotel openings [39] - Legacy-DH revenue rose 9% year-over-year to RMB 1.3 billion, attributed to business recovery and hotel network expansion [39] Market Data and Key Metrics Changes - The number of hotels in operation in Tier 3 and below cities accounted for 42%, up 2 percentage points year-over-year, while hotels in Tier 1 cities increased by 2 percentage points [17][18] - The number of active corporate clients exceeded 4,500, up 45% year-over-year [26] Company Strategy and Development Direction - The company continues to focus on high-quality growth, prioritizing quality over quantity in hotel openings [11] - The strategy includes cleaning up low-quality hotels and enhancing the overall service quality of the hotel portfolio [12] - The company aims to solidify its leading position in the limited service segment by expanding high-quality, value-for-money hotels [15] Management Comments on Operating Environment and Future Outlook - Management noted that the recovery of China's overall business travel demand remains stagnant, impacting RevPAR [25] - For Q4 2024, management expects RevPAR to decline in the mid-single digits year-over-year due to ADR pressure [53] - Looking ahead, management anticipates a stabilization and upward trend in RevPAR starting from next year, supported by government initiatives to boost domestic consumption [63] Other Important Information - The company closed 217 hotels in Q3 2024, with a focus on phasing out low-quality properties [12] - As of the end of Q3 2024, the company had RMB 9.3 billion in cash and cash equivalents, maintaining a solid net cash position of RMB 4 billion [46] - The company has bought back approximately USD 270 million worth of shares year-to-date [47] Q&A Session Summary Question: RevPAR trends in October and November and expectations for Q4 - Management indicated that business travel activity remains weak, impacting ADR and RevPAR, with expectations for a mid-single-digit decline in Q4 [51][53] Question: Strategy to enhance membership loyalty and increase direct sales ratio - Management is enhancing the membership program by improving benefits and seeking partnerships with airlines and car-hailing companies to boost membership growth [54][56][58] Question: Expectations for RevPAR next year and supply situation in China - Management expects RevPAR to stabilize and grow next year, with a focus on high-quality supply as low-quality hotels exit the market [62][64] Question: Full year opening targets and competition landscape - Management targets around 2,400 new openings for 2024, with a focus on maintaining quality and addressing competition in the midscale and upper-midscale segments [73][75] Question: Insights on leased and owned business strategy - Management confirmed ongoing closures of leased and owned hotels as part of a shift to a more asset-light model, with closures expected to continue but at a reduced pace compared to Q3 [83][84]

Investment Rating - Buy (Maintained) [1] Core Views - Huazhu Group's Q3 revenue was at the lower end of guidance, with operating profit down 10% YoY [2] - Domestic business net profit declined 1% YoY, while DH business narrowed its operating loss [2] - Domestic business accelerated store openings, with 774 new stores in Q3, reaching a total of 10,707 stores by Q3 2024 [3] - RevPAR declined 8% YoY due to a high base, but Q4 revenue growth guidance is 2-5%, indicating a narrowing decline [3] - Huazhu Group is a leader in the hotel industry, with competitive advantages in brand, traffic, and technology, and has expanded against the trend during the pandemic [4] Financial Performance - Q3 revenue was RMB 6.442 billion, up 2.4% YoY, at the lower end of the 2-5% guidance range [2] - Q3 net profit attributable to shareholders was RMB 1.273 billion, down 5% YoY, with adjusted net profit of RMB 1.372 billion, down 11% YoY [2] - Domestic business revenue was RMB 5.162 billion, up 1% YoY, contributing RMB 1.356 billion in net profit, down 1% YoY [2] - DH business revenue was RMB 1.28 billion, up 9% YoY, with a net loss of RMB 83 million, narrowing from the previous year [2] Store Expansion - Total stores reached 10,707 by Q3 2024, up 18.6% YoY, with 95% being franchised stores [3] - Q3 saw 774 new store openings, with a net increase of 556 stores, and a target of 2,200 new stores for the full year [3] - Domestic room count reached 1.03 million, up 20% YoY, with franchised rooms at 950,000, up 23% YoY [3] RevPAR and Occupancy - Overall RevPAR in Q3 was RMB 256, down 8.4% YoY, with occupancy at 84.9%, down 1.0 pct YoY [3] - Huazhu's RevPAR was RMB 244, down 2.4% YoY, with occupancy at 82.6%, up 0.8 pct YoY [3] - Q4 revenue growth guidance is 1-5%, implying a low single-digit decline in RevPAR, narrowing from Q3 [3] Financial Forecasts - Adjusted net profit forecasts for 2024-2026 are RMB 3.684 billion, RMB 4.065 billion, and RMB 4.481 billion, respectively [4] - PE ratios for 2024-2026 are 22x, 20x, and 18x, respectively [4] Market Data - Closing price: HKD 26.90 [7] - 52-week low/high: HKD 20.80/34.40 [7] - Price-to-book ratio: 6.86x [7] - Market capitalization: HKD 86.36 billion [7] Financial Ratios - ROE for 2023A: 33.66%, expected to decline to 18.39% by 2026E [12] - Gross margin for 2023A: 34.46%, expected to rise to 36.50% by 2026E [12] - Net profit margin for 2023A: 18.67%, expected to be 15.58% by 2026E [12]