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 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].

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]

Core Viewpoint - H World Group reported quarterly earnings of $0.61 per share, missing the Zacks Consensus Estimate of $0.69 per share, representing an earnings surprise of -11.59% [1][2] Financial Performance - The company posted revenues of $918 million for the quarter ended September 2024, missing the Zacks Consensus Estimate by 1.70%, compared to $861 million in the same quarter last year [2] - Over the last four quarters, H World Group has surpassed consensus EPS estimates only once [2] Stock Performance - H World Group shares have increased by approximately 5.2% since the beginning of the year, while the S&P 500 has gained 25.5% [3] - The current Zacks Rank for H World Group is 3 (Hold), indicating expected performance in line with the market in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.34 on revenues of $856.46 million, and for the current fiscal year, it is $1.83 on revenues of $3.37 billion [7] - The estimate revisions trend for H World Group is mixed, which may change following the recent earnings report [6] Industry Context - The Hotels and Motels industry, to which H World Group belongs, is currently in the bottom 18% of over 250 Zacks industries, indicating potential challenges ahead [8]

Hotel Operations - As of September 30, 2024, H World Group operated a total of 10,845 hotels and 1,062,546 hotel rooms[5] - H World operated 10,845 hotels with 1,062,546 rooms in 18 countries as of September 30, 2024[49] - The total number of hotels as of September 30, 2024, was 10,707, with 2,899 hotels in the pipeline[70] - The number of manachised and franchised hotels increased to 10,137 as of September 30, 2024, with a net addition of 579 hotels in Q3 2024[68] - There are 2,925 hotels in the pipeline, indicating significant future growth potential[77] - The economy hotel segment includes 5,461 operational hotels with 449,937 rooms and 1,091 in the pipeline[77] - The midscale hotel segment has 4,344 operational hotels with 465,743 rooms and 1,238 in the pipeline[77] - The upper midscale hotel segment consists of 866 operational hotels with 119,356 rooms and 493 in the pipeline[77] - The upscale hotel segment includes 147 operational hotels with 21,693 rooms and 95 in the pipeline[77] - The luxury hotel segment has 16 operational hotels with 2,368 rooms and 3 in the pipeline[77] - In China, there are 33 operational IntercityHotels and 92 in the pipeline as of September 30, 2024[78] - MAXX has 5 operational hotels and 5 in the pipeline in China as of September 30, 2024[78] - Steigenberger Hotels & Resorts has 12 operational hotels and 5 in the pipeline in China as of September 30, 2024[78] Financial Performance - Revenue for Q3 2024 was RMB6.4 billion (US$918 million), a 2.4% year-over-year increase, aligning with the guidance of 2% to 5%[3] - Hotel turnover increased 10.7% year-over-year to RMB26.0 billion in Q3 2024, with Legacy-Huazhu segment turnover up 11.0% and Legacy-DH segment turnover up 7.8%[3] - Total revenue for Q3 2024 was RMB 6,442 million (US$ 918 million), an increase from RMB 6,288 million in Q3 2023[60] - Net income attributable to H World Group Limited for Q3 2024 was RMB 1,273 million (US$ 181 million), compared to RMB 1,337 million in Q3 2023[60] - Net income attributable to H World was RMB1.3 billion (US$181 million) in Q3 2024, unchanged from Q3 2023[3] - Income from operations in Q3 2024 was RMB1.7 billion (US$245 million), a decrease from RMB1.9 billion in Q3 2023, with the Legacy-DH segment reporting a loss of RMB40 million due to one-off restructuring costs[23] - Operating margin in Q3 2024 was 26.7%, down from 30.4% in Q3 2023, attributed to a decline in hotel RevPAR and increased share-based compensation[24] - EBITDA (non-GAAP) in Q3 2024 was RMB2.0 billion (US$286 million), compared to RMB2.1 billion in Q3 2023[29] - Adjusted EBITDA for the Legacy-Huazhu segment was RMB2.1 billion in Q3 2024, down from RMB2.3 billion in Q3 2023[7] - Adjusted EBITDA (non-GAAP) in Q3 2024 was RMB2.1 billion (US$300 million), down from RMB2.3 billion in Q3 2023[31] - The company reported a net cash provided by operating activities of RMB 1,693 million (US$ 242 million) for Q3 2024[63] - H World incurred capital expenditures of RMB 209 million (US$ 30 million) in Q3 2024[63] Cash and Debt Management - As of September 30, 2024, the total balance of cash and cash equivalents was RMB7.2 billion (US$1.0 billion) with total debt of RMB5.4 billion (US$769 million)[34] - Cash and cash equivalents increased to RMB 7,247 million (US$ 1,033 million) as of September 30, 2024, from RMB 6,946 million at the end of 2023[56] - Total liabilities decreased to RMB 49,823 million (US$ 7,100 million) as of September 30, 2024, from RMB 51,283 million at the end of 2023[56] - H World’s total current liabilities decreased to RMB 12,408 million (US$ 1,768 million) as of September 30, 2024, from RMB 17,411 million at the end of 2023[56] - Operating cash inflow in Q3 2024 was RMB1.7 billion (US$242 million), while financing cash outflow was RMB2.1 billion (US$300 million), including RMB1.4 billion in dividends paid[33] Future Outlook - H World expects revenue growth for Q4 2024 to be in the range of 1%-5% compared to Q4 2023[7] - For Q4 2024, H World expects revenue growth of 1%-5% compared to Q4 2023, excluding the Legacy-DH segment[35] Key Metrics - The average daily rate (ADR) for Legacy-Huazhu hotels was RMB301 in Q3 2024, down from RMB324 in Q3 2023[8] - The occupancy rate for all Legacy-Huazhu hotels was 84.9% in Q3 2024, compared to 85.9% in Q3 2023[8] - The average daily room rate (ADR) for leased and owned hotels decreased by 6.0% year-over-year to RMB 406 in Q3 2023[71] - The occupancy rate for leased and owned hotels was 87.8% in Q3 2023, a slight decrease of 0.3 percentage points from the previous year[71] - The company’s basic earnings per share for Q3 2024 was RMB 0.41 (US$ 0.06), compared to RMB 0.42 in Q3 2023[60] - Adjusted earnings per share (diluted) for Q3 2023 was RMB 0.47, compared to RMB 0.43 in Q3 2024[65]

Core Insights - H World Group Limited reported a total of 10,845 hotels and 1,062,546 rooms in operation as of September 30, 2024, with a hotel turnover increase of 10.7% year-over-year to RMB26.0 billion in Q3 2024 [1][2][3] - The company achieved a revenue increase of 2.4% year-over-year to RMB6.4 billion (US$918 million) in Q3 2024, aligning with its previously announced guidance [1][2][9] - Net income attributable to H World Group Limited remained stable at RMB1.3 billion (US$181 million) in Q3 2024, with a notable net loss from the Legacy-DH segment due to restructuring costs [1][2][23] Financial Performance - Revenue from the Legacy-Huazhu segment increased by 1.0% year-over-year to RMB5.2 billion, while the Legacy-DH segment saw an 8.9% increase to RMB1.3 billion [1][10][11] - EBITDA (non-GAAP) for Q3 2024 was RMB2.0 billion (US$286 million), a decrease from RMB2.1 billion in Q3 2023 [1][24] - Adjusted EBITDA (non-GAAP) was RMB2.1 billion (US$300 million) in Q3 2024, down from RMB2.3 billion in Q3 2023 [1][25] Operational Highlights - The Legacy-Huazhu segment opened 774 hotels in Q3 2024, while closing 217 hotels, resulting in a total of 2,899 unopened hotels in the pipeline [3][4] - The average daily rate (ADR) for Legacy-Huazhu hotels was RMB301, down from RMB324 in Q3 2023, with an occupancy rate of 84.9% [5][6] - Legacy-DH hotels reported an ADR of EUR117, with an occupancy rate of 69.8% in Q3 2024 [8] Guidance and Future Outlook - For Q4 2024, H World expects revenue growth in the range of 1%-5% compared to Q4 2023, also excluding the Legacy-DH segment [1][29] - The company aims to continue expanding its presence in lower-tier cities in China and focus on sustainable high-quality growth [9]

Core Viewpoint - Wall Street anticipates a year-over-year increase in earnings for H World Group, driven by higher revenues, with a focus on how actual results will compare to estimates [1][2] Earnings Expectations - The earnings report is expected on November 26, 2024, with an anticipated EPS of $0.69, reflecting a 23.2% increase year-over-year [3][4] - Revenues are projected to reach $933.86 million, marking an 8.5% increase from the previous year [4] Estimate Revisions - The consensus EPS estimate has been revised 3.13% higher in the last 30 days, indicating a collective reassessment by analysts [5] - The Most Accurate Estimate aligns with the Zacks Consensus Estimate, resulting in an Earnings ESP of 0% [11][12] Earnings Surprise Prediction - The Zacks Earnings ESP model suggests that a positive or negative reading indicates the likelihood of actual earnings deviating from consensus estimates, with a strong predictor for positive readings [8][9] - H World Group currently holds a Zacks Rank of 3, complicating predictions of an earnings beat [13] Historical Performance - In the last reported quarter, H World Group's actual earnings of $0.46 per share fell short of the expected $0.52, resulting in a surprise of -11.54% [14] - Over the past four quarters, the company has exceeded consensus EPS estimates twice [15] Conclusion - While H World Group does not appear to be a strong candidate for an earnings beat, investors should consider other influencing factors before making decisions [18]

Core Viewpoint - H World Group Limited, a significant player in the global hotel industry, is set to release its unaudited financial results for Q3 2024 on November 26, 2024, after market hours in Hong Kong and before the U.S. market opens [1]. Company Overview - H World Group Limited operates 10,286 hotels with a total of 1,001,865 rooms across 18 countries as of June 30, 2024 [5]. - The company’s hotel brands include Hi Inn, Elan Hotel, HanTing Hotel, JI Hotel, Starway Hotel, Orange Hotel, Crystal Orange Hotel, Manxin Hotel, Madison Hotel, Joya Hotel, Blossom House, Ni Hao Hotel, CitiGO Hotel, Steigenberger Hotels & Resorts, MAXX, Jaz in the City, IntercityHotel, Zleep Hotels, Steigenberger Icon, and Song Hotels [5]. - H World holds master franchise rights for Mercure, Ibis, and Ibis Styles, along with co-development rights for Grand Mercure and Novotel in the pan-China region [5]. Business Model - H World employs a mixed business model that includes leased and owned, manachised, and franchised hotels [5]. - As of June 30, 2024, 10% of hotel rooms were operated under the lease and ownership model, while 90% were under the manachise and franchise model [5].

Group 1 - H World Group Limited (HTHT) is experiencing significant activity in the options market, particularly with the Jan 17, 2025 $15.00 Call option showing high implied volatility, indicating potential for a major price movement [1] - Implied volatility reflects market expectations for future stock movement, suggesting that investors anticipate a significant event that could lead to a substantial rally or sell-off [2] - Currently, H World Group holds a Zacks Rank 3 (Hold) in the Hotels and Motels industry, which is in the bottom 17% of the Zacks Industry Rank, with no analysts increasing their estimates for the current quarter and one analyst revising downward [3] Group 2 - The high implied volatility for H World Group may indicate a developing trading opportunity, as options traders often seek to sell premium on options with high implied volatility to capture decay [4]

Core Insights - H World Group Ltd (HTHT) shares increased by 4.28% on October 2, reaching an intraday high of $41.61 before closing at $40.52, which is 4.00% below its 52-week high and 49.91% above its 52-week low [1][2] Group 1: Stock Performance - The trading volume for H World Group Ltd was 1,656,441 shares, representing 83.3% of the average daily volume of 1,988,006 [1] - The stock's current price of $40.52 is 4.00% below its 52-week high of $42.21 and 49.91% above its 52-week low of $27.03 [1] Group 2: Analyst Forecasts - The average target price for H World Group Ltd, based on estimates from 15 analysts, is $45.10, indicating an upside of 11.29% from the current price [2] - The consensus recommendation from 19 brokerage firms gives H World Group Ltd an average rating of 1.6, suggesting an "Outperform" status [2] - GuruFocus estimates the GF Value for H World Group Ltd at $58.31 in one year, suggesting a potential upside of 43.9% from the current price [2]