Core Viewpoint - The company reported stable revenue growth and a significant increase in net profit for Q2 2025, driven by its hotel operations and strategic focus on franchise business expansion [1][2][4] Group 1: Financial Performance - Q2 hotel revenue reached approximately 26.92 billion yuan, a year-on-year increase of 15.0%, with Huazhu China growing by 15.6% [1] - Q2 revenue was 6.43 billion yuan, up 4.5% year-on-year, aligning closely with the previous guidance of 1-5% [1] - Net profit attributable to shareholders was 1.54 billion yuan, a year-on-year increase of 44.7%, aided by foreign exchange gains from euro appreciation [1] - Adjusted net profit was 1.35 billion yuan, reflecting a 7.6% year-on-year growth, while adjusted EBITDA grew by 11.3% [1] Group 2: Business Strategy and Operations - The company is focusing on franchise business growth, with franchise revenue increasing by 22.8% in Q2, while the number of franchise rooms grew by 20.0% year-on-year [2] - Total operating profit from franchise operations rose by 23.2%, contributing 64% to the overall profit, an increase of 7 percentage points [2] - The company is strategically reducing the number of direct-operated stores, which saw a revenue decline of 7.6% and an operating profit drop of 13.4% [2] Group 3: Market Trends and Future Outlook - Q2 mixed RevPAR for Huazhu China was 235 yuan, down 3.8% year-on-year, with same-store RevPAR decreasing by 7.9% [3] - The company is actively renovating older stores and launching new brands, with a focus on high-quality hotel development [3] - The company has adjusted its full-year RevPAR expectations to a low single-digit decline, while maintaining revenue growth projections of 2%-6% [4] - The company has approved a semi-annual dividend policy totaling 250 million USD, alongside share buybacks, representing 92% of the net profit for the first half of the year [4]

Investment Rating - The investment rating for the company is "Outperform the Market" [6] Core Views - The company reported steady growth in Q2, with hotel revenue reaching approximately 26.92 billion yuan, a year-on-year increase of 15.0%, and a net profit of 1.54 billion yuan, up 44.7% [1][10] - The company is strategically shifting focus from direct-operated stores to franchise operations, with franchise revenue growing by 22.8% in Q2, while direct-operated store revenue declined [2][13] - The company has adjusted its full-year RevPAR expectations downward, anticipating a low single-digit decline, while maintaining revenue growth expectations of 2%-6% [4][15] Summary by Sections Financial Performance - Q2 revenue was 6.43 billion yuan, a 4.5% increase year-on-year, with adjusted net profit at 1.35 billion yuan, up 7.6% [1][10] - The adjusted EBITDA grew by 11.3% year-on-year [1] - The company’s total hotel operating revenue for Q2 was approximately 26.92 billion yuan, with a significant contribution from Huazhu China [10] Business Strategy - The company is focusing on franchise business growth, with franchise room numbers increasing by 20.0% year-on-year, while direct-operated store revenue and profit declined [2][13] - The company is strategically reducing the number of direct-operated stores while optimizing existing store profitability through rent agreements and efficiency improvements [2] Market Trends - The mixed RevPAR for Huazhu China in Q2 was 235 yuan, a decrease of 3.8% year-on-year, with same-store RevPAR down 7.9% [3][14] - The company is actively renovating older stores and launching new brands to adapt to market changes, with a focus on high-quality hotel development [3][14] Future Outlook - The company has revised its full-year RevPAR forecast to a low single-digit decline, reflecting ongoing market uncertainties [4][15] - The company plans to enhance its membership program, which has grown to 288 million members, contributing significantly to revenue [4][15] - The company has announced a semi-annual dividend policy totaling 250 million USD, reflecting strong shareholder returns [4][15]

Core Viewpoint - The hotel industry in China faces challenges due to rapid supply increases and macroeconomic factors, but H World Group (Huazhu) demonstrates resilience and growth through strategic expansion and operational excellence [1][3]. Financial Performance - In Q2 2025, Huazhu's hotel revenue reached 26.9 billion yuan, a 15% year-on-year increase; total revenue was 6.4 billion yuan, up 4.5% [1]. - Management and franchise income grew by 22.8% to 2.9 billion yuan; adjusted net profit was 1.35 billion yuan, a 7.6% increase; adjusted EBITDA was 2.3 billion yuan, up 11.3% [1]. - The total number of operating hotels reached 12,137, an 18% increase year-on-year, with 1,184,915 rooms, up 18.3% [1]. Expansion Strategy - Huazhu opened 597 new hotels in Q2, with a focus on economy and mid-range hotels, which accounted for 44% and 42% of new openings, respectively [6]. - The company emphasizes high-quality expansion rather than blind growth, targeting underdeveloped markets, including rural areas [3][6]. - The brand matrix is diversifying, with the launch of new hotel versions catering to different market segments [8][10]. Market Position and Trends - The Chinese hotel market is experiencing structural changes, with mid-range hotels becoming the main growth driver [10]. - Huazhu's brands, including Hanting and Qianxi, are positioned to meet the rising demand for quality and affordable accommodations [11]. - The company ranks fourth globally in terms of operating rooms, surpassing InterContinental Hotels Group [8]. Membership and Customer Engagement - Huazhu upgraded its membership program to address consumer concerns about pricing, enhancing member loyalty [12]. - As of Q2, the number of Huazhu members reached 288 million, a 17.5% increase, with member bookings accounting for 65.1% of total room nights [12].