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]
华住集团-S：业绩点评：大陆开店继续加速，RevPAR降幅有望收窄