Investment Rating - Maintain "Buy" rating for Huazhu Group-S (1179 HK) [1] Core Views - Huazhu Group demonstrated resilience in Q2 2024 with revenue of RMB 6 15 billion (+11 2% YoY) and net profit attributable to shareholders of RMB 1 067 billion (+5% YoY) [1] - The company achieved a milestone of 10 286 global hotels with 10 150 under the Huazhu brand including 9 558 franchised hotels [1] - Huazhu Group announced a 3-year shareholder return plan including up to $2 billion in dividends and a $1 billion share repurchase program [1] Financial Performance - Q2 2024 revenue reached RMB 6 15 billion (+11 2% YoY) at the upper end of guidance [1] - Net profit attributable to shareholders was RMB 1 067 billion (+5% YoY) [1] - EBITDA reached RMB 1 9 billion with adjusted EBITDA of RMB 2 billion (+11% YoY) [1] - Huazhu brand contributed RMB 1 033 billion in net profit (+4% YoY) while DH segment contributed RMB 34 million (+54 5% YoY) [1] Expansion and Market Position - Total hotels reached 10 286 globally with 10 150 under Huazhu brand [1] - 567 new hotels opened in Q2 with net openings of 466 [1] - Pipeline hotels increased to 3 258 [1] - Full-year new hotel opening target raised from 1 800 to 2 200 [1] Operational Metrics - Huazhu brand RevPAR was RMB 244 (-2% YoY) with OCC of 82 6% (+0 7pct YoY) and ADR of RMB 296 (-2 9% YoY) [1] - DH brand RevPAR was €82 (+4 5% YoY) with ADR of €120 (+2 7% YoY) and OCC of 68 3% (+1 2pct YoY) [1] - Q3 2024 revenue growth guidance of 2-5% [1] Shareholder Returns - 3-year shareholder return plan announced with up to $2 billion in dividends [1] - Semi-annual dividends with annual payout ratio of at least 60% of net profit [1] - $1 billion share repurchase program approved effective August 21 2024 [1] Financial Forecasts - 2024-2026 revenue forecast at RMB 23 396 million RMB 24 774 million and RMB 25 953 million respectively [2] - 2024-2026 net profit forecast at RMB 4 165 million RMB 4 438 million and RMB 4 711 million respectively [2] - 2024-2026 EPS forecast at RMB 1 30 RMB 1 38 and RMB 1 47 respectively [2] - 2024-2026 PE ratios forecast at 16x 15x and 14x respectively [2] Valuation Metrics - Current price: HK$22 65 [2] - 2024-2026 PB ratios forecast at 4 1x 3 2x and 2 6x respectively [2] - 2024-2026 EV/EBITDA ratios forecast at 11 46x 10 79x and 10 19x respectively [6]

Klaus Vedfelt My investment rating for H World Group Limited (NASDAQ:HTHT) [1179:HK] stays as a Hold. On the positive side of things, HTHT offers a potential mid-single digit percentage shareholder yield. On the negative side of things, H World's below-expectations Q3 revenue guidance indicates that there are short-term headwinds for the company. As such, I continue to have a Neutral view of HTHT. The outlook for HTHT in the near term and long run was the subject of my June 9, 2024 write-up. I take a closer ...

Investment Rating - The report maintains a "Buy" rating for Huazhu Group-S (01179 HK) and Huazhu (HTHT O) [4] Core Views - Huazhu Group reported strong Q2 2024 results with revenue of 6 15 billion CNY (+11 2% YoY) and adjusted net profit of 1 25 billion CNY (+16 9% YoY) [1] - Domestic occupancy rate (Occ) outperformed ADR while international markets saw growth in both volume and price [1] - Operational efficiency improved with reductions in rent depreciation and consumables costs [1] - The company achieved a milestone of 10 000 domestic hotels and raised its full-year store opening guidance from 1 800 to 2 200+ [1] Financial Performance - Q2 2024 domestic RevPAR was 244 CNY (-2% YoY) with ADR at 296 CNY (-3% YoY) and Occ at 82 6% (+1pp YoY) [1] - International RevPAR grew 5% YoY to 82 EUR with ADR at 120 EUR (+3% YoY) and Occ at 68 3% (+1pp YoY) [1] - H1 2024 revenue reached 11 43 billion CNY (+14 1% YoY) with adjusted net profit of 2 03 billion CNY (+39 0% YoY) [1] Store Expansion - Q2 2024 saw a net increase of 466 domestic hotels (567 new openings) bringing the total to 10 150 [1] - The pipeline of hotels under development increased to 3 294 (3 266 domestic) up by 156 from Q1 2024 [1] - H1 2024 saw 1 136 new openings with 1 064 remaining to meet the revised full-year target [1] Valuation and Forecast - The report forecasts 2024-2026 net profits of 4 2/4 8/5 4 billion CNY respectively [2] - A 24x PE valuation for 2024 implies a fair value of 35 29 HKD/share for HK-listed shares and 45 38 USD/ADS for US-listed shares [2] Financial Ratios - 2024E revenue growth is projected at 10 7% with EBITDA of 7 287 million CNY [3] - ROE is expected to be 25 6% in 2024E declining to 19 9% by 2026E [3] - Net profit margin is forecasted at 17 5% in 2024E increasing to 18 8% by 2026E [3]

Investment Rating - The report assigns a rating of "Accumulate" for the company [4][5]. Core Insights - The company's performance meets expectations, with macroeconomic fluctuations causing a slowdown in growth. However, the company has raised its store opening guidance, indicating an expansion in market share [4][5]. - The adjusted net profit for 2024 has been increased to 4.488 billion RMB (+2.58 billion), while the adjusted net profit for 2025 and 2026 has been lowered to 4.978 billion and 5.943 billion RMB respectively [5]. - The target price is maintained at 42.50 HKD based on an industry average PE of 25x for 2025 [5]. Financial Summary - Revenue for 2023 is projected at 21.882 billion RMB, with a year-on-year growth of 57.86%. The adjusted net profit for 2023 is expected to be 4.085 billion RMB [4]. - The company’s revenue for Q2 2024 is reported at 6.148 billion RMB, reflecting an increase of 11.18%, with adjusted net profit at 1.254 billion RMB (+17.42%) [5]. - The RevPAR for Q2 2024 shows a slight decline of 2.0% year-on-year, with ADR down by 2.9% and occupancy rate up by 0.7 percentage points [5].

Investment Rating - The report maintains a "Buy" rating for the company, Huazhu Group, with a target price adjusted to HKD 28.0 and USD 35.4, reflecting potential upside of 26.7% and 27.8% respectively [2][3][5]. Core Insights - In Q2 2024, despite facing high base effects, Huazhu Group achieved revenue growth at the upper end of its guidance, with total revenue reaching RMB 6.15 billion, a year-on-year increase of 11.2% [2]. - The domestic RevPAR (Revenue per Available Room) for Huazhu Group decreased by 2% to RMB 244, but the company outperformed the market, with occupancy rates improving by 0.7 percentage points [2]. - The report highlights an increase in operational efficiency, leading to a gross margin improvement of 2.3 percentage points, despite a rise in operating expense ratios due to expansion [2]. - The company has raised its store opening guidance, achieving its strategic goal of 10,150 domestic stores, with 567 new openings in Q2 2024 [2]. - The report anticipates a slowdown in revenue growth for Q3 2024 due to higher base effects, but believes the company can still meet its revenue guidance [2]. Financial Summary - For 2024E, the company is projected to generate revenue of RMB 23.87 billion, with a year-on-year growth of 9.1% [9]. - Adjusted net profit for 2024E is estimated at RMB 3.91 billion, reflecting a slight decrease of 4.3% compared to the previous year [9]. - The report provides a detailed financial forecast, including EBITDA margins and return on equity metrics, indicating a positive trend in profitability despite market challenges [9][10].

Investment Rating - The investment rating for the company is "Outperform the Market" [1][3][20] Core Views - In Q2 2024, the company reported a revenue of 6.1 billion yuan, an increase of 11.2%, which is at the upper limit of the previous guidance of 7-11% [1][6] - The adjusted net profit for Q2 2024 grew by 17%, reaching 1.254 billion yuan, while the adjusted EBITDA was 2.04 billion yuan, up 15.1% [1][6] - The company has revised its full-year store opening guidance from 1,800 to 2,200 stores, indicating an acceleration in expansion [1][11] - The company expects Q3 2023 revenue growth to be between 2-5%, which is significantly lower than Q2 due to external environment changes and high base effects [1][17] - The company announced a shareholder return plan of up to 2 billion USD over the next three years, with a minimum annual dividend payout ratio of 60% [1][19] Summary by Sections Financial Performance - Q2 2024 revenue was 6.1 billion yuan, up 11.2% year-on-year, with domestic revenue contributing 4.83 billion yuan, also up 11.1% [1][6] - The adjusted net profit for Q2 was 1.254 billion yuan, reflecting a 16.9% increase, while the adjusted EBITDA was 2.04 billion yuan, up 15.1% [1][6] - The company’s overall adjusted EBITDA for Q2 showed a growth of 15.1%, with domestic and overseas adjusted EBITDA increasing by 14.0% and 35.1% respectively [1][6] Market Position - The company’s domestic RevPAR decreased by 2% year-on-year in Q2 2024, but it outperformed the industry average, which saw a decline of approximately 7-8% [1][11] - The company’s strong brand and operational capabilities are highlighted as key competitive advantages, especially in the face of OTA commission pressures [1][11] Expansion Plans - The company opened a record 567 new stores in Q2 2024, bringing the total number of domestic stores to 10,150, with a store reserve of 3,266 [1][11] - The revised full-year opening target of 2,200 stores reflects the company’s commitment to aggressive expansion [1][11] Future Outlook - The company anticipates a revenue growth of 2-5% for Q3 2023, which is lower than Q2 due to external factors and high base effects from the previous year [1][17] - The adjusted net profit forecasts for 2024-2026 have been revised down to 4.07 billion, 4.54 billion, and 5.16 billion yuan respectively [1][19]

事件 8 月 20 日公司公告 2Q24 业绩，收入 61 亿元/+11.2%，归母净利 10.7 亿元/+5.1%，经调整净利 12.5 亿元/+16.9%，经调整 EBITDA 20.4 亿元/+15.1%。 点评 经营数据：Q2 境内高基数下 OCC 仍有增长，境外量价同比均有提 升。LH 2Q24 RevPAR 244 元/-2.0%、为 19 年同期 118.4%，恢复 度环比 Q1-2.9pct，行业淡季压力较大情况下表现持续领先；拆分 量价，OCC 82.6%/+0.7pct、ADR 296 元/-2.9%；拆分结构，Q2 成 熟店整体/经济型/中高端 RevPAR 同比-3.6%/-4.2%/-3.2%。DH 2Q24 RevPAR 82 欧元/+4.5%、恢复至 19 年同期 115.5%，受益于 6 月世界杯；拆分看 OCC 68.3%/+1.2pct，ADR 120 欧元/+2.7%。 Q2 收入增速略好于指引，Q3 预期增长 2~5%。2Q24 收入增速较此 前季报公告指引上限 11%略高，其中 LH 收入 48.3 亿元/+11.1%， DH 收入 13.2 亿元/+11.6%。成本 ...

Investment Rating - The investment rating for the company is "Buy" (maintained) [7] Core Views - The company has achieved revenue at the upper limit of its guidance and has raised its annual store opening target to 2,200 [10] - The company is expected to generate revenues of 242.4 billion, 260.5 billion, and 280.3 billion CNY for 2024, 2025, and 2026 respectively, with corresponding growth rates of 10.7%, 7.6%, and 7.6% [10][11] - The net profit attributable to the parent company is projected to be 42.5 billion, 49.1 billion, and 56.7 billion CNY for the same years, with a three-year CAGR of 11.6% [10][11] - The company maintains a strong market position with significant brand and operational strength, indicating substantial room for domestic store penetration, brand elevation, and globalization [10] Financial Data Summary - For 2024, the company is expected to achieve an EBITDA of 6,249 million CNY and a net profit of 4,254 million CNY, with a P/E ratio of 15 [11] - The company reported a revenue of 61 billion CNY in Q2 2024, reflecting a year-on-year increase of 11.2%, with a net profit of 11 billion CNY, up 5.1% year-on-year [10] - The company’s gross margin improved to 39.3% in Q2 2024, an increase of 2.3 percentage points year-on-year [10] - The company has reached a milestone of 10,000 hotels and has a reserve of 3,266 stores, supporting its expansion plans [10]

Financial Data and Key Metrics - Legacy-Huazhu's RevPAR in Q2 2024 was RMB244, down 2% YoY, with ADR at RMB296, down 2.9% YoY, and occupancy rate at 82.6%, up 0.7 percentage points YoY [7] - Total revenue for the group increased 11% YoY to RMB6.1 billion, with Legacy-Huazhu revenue growing 11% YoY to RMB4.8 billion and Legacy-DH revenue rising 12% YoY to RMB1.3 billion [22] - Adjusted EBITDA increased 15% YoY to RMB2 billion, with Legacy-Huazhu's adjusted EBITDA growing 14% YoY to RMB1.9 billion and DH business generating RMB131 million adjusted EBITDA, turning profitable from a loss position [25][26] Business Line Performance - The company opened 567 new hotels in Q2 2024, with 101 hotel closures, and the number of hotels in the pipeline reached a record high of 3,266 [11] - Economy and middle-scale hotels accounted for 92%, 82%, and 89% of hotels in operation, hotels in pipeline, and hotel openings, respectively [12] - The proportion of HanTing 3.5 and above versions in operation increased to 36.3% in Q2 2024, up 6.5 percentage points compared to the end of last year [12] Market Performance - Domestic airline passengers increased 16.4% YoY and 12.4% compared to the same period in 2019, while high-speed railway passengers reached a record high of 2.1 billion, up 18.4% YoY [8] - The number of room nights sold in China increased by approximately 21% YoY, with occupancy rate increasing by 0.7 percentage points YoY [9] - DH RevPAR in Q2 2024 was EUR 82, up 4.5% YoY, driven by a 2.7% increase in ADR to EUR 120 and a 1.2 percentage point increase in occupancy rate to 68.3% [18] Company Strategy and Industry Competition - The company aims to achieve 20,000 hotels in 2,000 cities, focusing on service excellence-centric, sustainable quality growth strategy [6] - The company is focusing on product upgrades, service excellence, and membership programs to strengthen core competitive advantages and drive long-term sustainable growth [10] - The company is repositioning its HI Inn brand to focus on ultimate value for money, with a new HI Inn 6.0 version designed to meet customers' core accommodation needs [16] Management Commentary on Operating Environment and Future Outlook - The company expects RevPAR to gradually return to a healthier and sustainable growth trend, with Q3 2024 RevPAR expected to decline around mid-single digit YoY [30] - The company revised up its full-year growth hotel opening target to over 2,200 hotels, up from the previous guidance of around 1,800 hotels [27] - The company remains focused on lower-tier cities penetration and upper mid-segment penetration, with confidence in maintaining a strong competitive advantage in the industry [32] Other Important Information - The company announced a 3-year shareholder return plan with an aggregate amount of up to US$2 billion, including semi-annual ordinary dividends, special dividends, and share buybacks [27] - The company had RMB9.9 billion in cash, cash equivalents, restricted cash, and time deposits as of the end of June 2024, with a solid net cash position of RMB4.3 billion [26] Q&A Session Question: RevPAR expectations for Q3 2024 and full year 2024 - The company expects Q3 2024 RevPAR to decline around mid-single digit YoY, with a gradual return to a healthier and sustainable growth trend [30] Question: Investment appetite for franchisees - The company remains confident in franchisee sentiment, focusing on lower-tier cities penetration and upper mid-segment penetration, with a strong pipeline and high-quality growth strategy [32] Question: Hotel opening capacity and supply chain progress - The company is improving supply chain capability by replacing higher-quality suppliers and improving efficiency, with a focus on high-quality growth over scale [35][36] Question: Hotel supply impact on RevPAR and margins - The company believes the supply and demand will balance, with a focus on high-quality supply and maintaining core competitiveness through service excellence and product upgrades [38][41] Question: DH long-term targets and strategy - The company is focusing on asset-light transformation, cost control, and efficiency improvement for DH, with plans to leverage DH's brand and product in the Middle East and Asia Pacific [40]

Investment Rating - Buy (Maintained) [1] Core Views - Q2 revenue slightly exceeded guidance with an 11.2% YoY growth, driven by the turnaround of overseas business DH, contributing to a net profit of RMB 1.067 billion, up 5% YoY [3] - Mainland business revenue grew 11.1% YoY, contributing RMB 1.033 billion in net profit, while DH segment revenue grew 11.6% YoY, turning a profit of RMB 34 million compared to a loss of RMB 174 million in the same period last year [3] - Adjusted EBITDA for Q2 was RMB 2 billion, up 11% YoY, and adjusted net profit was RMB 1.25 billion, up 17% YoY [3] - Mainland store openings exceeded expectations, with 10,150 stores by the end of Q2 2024, up 18% YoY, and a record high of 3,258 reserve stores [3] - RevPAR declined 2.4% YoY in Q2 due to a high base, with Q3 revenue growth guidance of 2-5% [3] - The company announced a USD 1 billion share repurchase plan over five years in July [3] Financial Forecasts and Valuation - Revenue is projected to grow from RMB 23.945 billion in 2024E to RMB 28.845 billion in 2026E, with a CAGR of 9.43% to 9.74% [2] - Net profit attributable to shareholders is forecasted to be RMB 3.702 billion in 2024E, RMB 4.068 billion in 2025E, and RMB 4.484 billion in 2026E [2] - EPS is expected to be RMB 1.15 in 2024E, RMB 1.27 in 2025E, and RMB 1.40 in 2026E [2] - P/E ratios are projected at 17.91x for 2024E, 16.30x for 2025E, and 14.79x for 2026E [2] Mainland Business Performance - Mainland store count reached 10,150 by Q2 2024, with 94% being franchised stores [3] - Q2 saw 567 new store openings and 466 net openings, with the full-year new store target revised upward from 1,800 to 2,200 [3] - Mainland room count reached 974,000, up 19% YoY, with franchised rooms accounting for 889,000, up 21.6% YoY [3] RevPAR and Revenue Guidance - Q2 RevPAR was RMB 244, down 2.4% YoY, with occupancy rate (OCC) at 82.6%, up 0.8 ppts YoY, and ADR at RMB 296, down 3.0% YoY [3] - Q3 revenue growth is guided at 2-5%, with RevPAR expected to decline by high single digits [3] Market Data - Closing price: HKD 22.55 [5] - 52-week low/high: HKD 20.80/HKD 36.30 [5] - P/B ratio: 5.75x [5] - Market cap: HKD 72.394 billion [5] Financial Ratios - ROIC: 16.32% in 2023A, projected to be 16.87% in 2024E [8] - ROE: 33.66% in 2023A, expected to decline to 18.38% by 2026E [8] - Gross margin: 34.46% in 2023A, projected to remain stable around 35.57-35.77% from 2024E to 2026E [8]