Investment Rating - The report assigns an "Accumulate" rating for Huazhu Group, marking the first coverage of the company [6][16]. Core Views - Huazhu Group has established a competitive barrier through a combination of brand strength, technological innovation, and traffic management, positioning itself as a platform-based enterprise. The company has significant expansion potential both domestically and internationally, with a focus on middle and high-end markets [9][17]. Summary by Sections Company Overview - Huazhu Group, founded in 2005, has become one of the fastest-growing hotel groups globally, with a hotel count CAGR of 20.8% and revenue CAGR of 18.0% from 2013 to 2023. As of March 2024, the company operates 9,817 hotels with 955,700 rooms across 30+ brands in 18 countries [22][25]. Industry Update - The hotel industry is experiencing a cyclical recovery, with supply returning to pre-pandemic levels. By the end of 2023, the number of hotels in China had recovered to 96% of pre-pandemic levels, driven by sustained leisure demand and rational business travel recovery [9][59]. Core Advantages - Huazhu's competitive edge lies in its integrated approach of brand, technology, and traffic management. The company is well-positioned to capture market share as it continues to expand into smaller cities and enhance its brand portfolio through mergers and internal integration [9][14]. Key Highlights - The company is expected to achieve revenues of CNY 242.4 billion, CNY 261.2 billion, and CNY 281.1 billion for 2024, 2025, and 2026, respectively, with corresponding growth rates of 10.8%, 7.7%, and 7.6%. The net profit attributable to shareholders is projected to be CNY 42.5 billion, CNY 49.1 billion, and CNY 56.7 billion for the same years [16][12]. Financial Data and Valuation - The report anticipates a three-year CAGR of 8.7% for revenue and 11.6% for net profit, with price-to-earnings ratios of 16x, 14x, and 12x for the years 2024, 2025, and 2026, respectively [16][12]. Investment Focus - The report emphasizes Huazhu's ongoing expansion into lower-tier cities and its potential for upward brand migration, alongside a gradual internationalization strategy that is expected to enhance profitability [9][17].
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