Core Viewpoint - The company reported a first-quarter revenue that met expectations, with adjusted net profit remaining stable year-on-year, indicating resilience amid industry fluctuations [1][2][3] Group 1: Financial Performance - In Q1, the company's hotel revenue was approximately 22.5 billion RMB, a year-on-year increase of 14.3%, while total revenue was about 5.4 billion RMB, up 2.2% [1] - The net profit attributable to shareholders was around 894 million RMB, reflecting a year-on-year growth of 35.7, primarily due to foreign exchange gains [1] - Adjusted net profit stood at 775 million RMB, showing no significant change year-on-year [1] Group 2: Domestic Hotel Operations - Domestic segment revenue reached 4.481 billion RMB, a growth of 5.5%, with direct-operated hotels generating 1.913 billion RMB (down 9.4%) and franchise hotels 2.472 billion RMB (up 21.1%) [1] - The overall RevPAR for domestic hotels decreased by 3.9%, with same-store RevPAR down 8.3% [1] - The company had a total of 11,564 hotels in operation by the end of Q1, with 694 new openings and 155 closures, aiming for approximately 2,300 new openings for the year [1] Group 3: International Hotel Operations - Internationally, the company reported a revenue of 918 million RMB, a decline of 11.3%, with direct-operated store revenue down 11.2% [2] - The adjusted EBITDA for the international segment was -77 million RMB, indicating an increase in losses primarily due to the transition to a light-asset model and restructuring efforts [2] - The company plans to continue its loss reduction strategy throughout the year [2] Group 4: Market Outlook and Strategy - The company anticipates a revenue growth of 1-5% in Q2, with domestic segment growth projected at 3-7% and franchise revenue expected to rise by 18-22% [2] - The management noted that the business market is stabilizing, and leisure travel demand remains resilient, with expectations for a narrowing decline in RevPAR in Q2 [3] - The company is focusing on high-quality expansion, with 43% of its operating hotels in third-tier cities and below, and 54% of its upcoming hotels in the same categories [3]

Investment Rating - The investment rating for the company is "Outperform the Market" [7] Core Views - The company is experiencing short-term disruptions due to industry cycles but is focusing on high-quality expansion and internal improvements. The first quarter revenue met expectations, with hotel operating revenue around 22.5 billion RMB, a year-on-year increase of 14.3%, and total revenue of approximately 5.4 billion RMB, a year-on-year increase of 2.2% [1][11] - The company aims for a revenue growth of 1-5% in Q2, with domestic segments expected to grow by 3-7% and franchise revenue by 18-22%. The management anticipates a narrowing decline in RevPAR in Q2, with a goal of at least maintaining or growing throughout the year [4][18] Summary by Sections Domestic Hotels - In Q1, domestic revenue was 4.481 billion RMB, up 5.5% year-on-year. Direct-operated hotels saw a decline of 9.4%, while franchise revenue increased by 21.1%. The overall RevPAR decreased by 3.9%, with same-store RevPAR down by 8.3% [2][16] - The company opened 694 new hotels and closed 155, with a total of 11,564 hotels by the end of Q1. The company plans to open approximately 2,300 new hotels throughout the year [2][16] Overseas Hotels - Q1 overseas revenue was 918 million RMB, down 11.3%. The decline was primarily due to the transition of 10 direct-operated hotels to a light-asset franchise model and the closure of one direct-operated hotel. The adjusted EBITDA for Q1 was -77 million RMB, indicating an increase in losses due to restructuring [3][17] Financial Forecasts - The company maintains adjusted net profit forecasts for 2025-2027 at 4.66 billion, 5.37 billion, and 6.13 billion RMB, respectively, with a three-year CAGR of 18%. The dynamic PE ratios are projected to be 17, 15, and 13 times for the respective years [5][19] - The company has a shareholder return plan of 2 billion USD over three years, which adds marginal appeal to the investment [5][19]