Investment Rating - The investment rating for the company is "Buy" and is maintained [9] Core Views - In Q3 2025, the company achieved operating revenue of 2.121 billion yuan, a year-on-year decline of 1.6%, and a net profit attributable to shareholders of 358 million yuan, a year-on-year decline of 2.21% [2][6] - Looking ahead, with the steady recovery of the economy and the gradual increase in investment willingness from franchisees, the hotel industry is expected to experience stable growth [2][6] - In the short term, the company plans to open 1,500 new hotels in 2025, accelerating the pace of store openings and continuously enhancing hotel product strength [2][6] - In the long term, there is significant room for expansion of mid-to-high-end hotels in lower-tier markets, supported by a high inventory of reserve stores, and ongoing upgrades of products like Home NEO are expected to further enhance brand image [2][6] Financial Performance - For the first three quarters of 2025, the company reported operating revenue of 5.782 billion yuan, a year-on-year decline of 1.81%, and a net profit attributable to shareholders of 755 million yuan, a year-on-year increase of 4.36% [6] - In Q3 2025, the overall RevPAR (Revenue per Available Room) decreased by 2.8%, with the economic hotel segment showing a positive growth of 1.4% [12][13] - The gross profit margin improved by 1.7 percentage points year-on-year to 44.79%, while the net profit margin slightly increased by 0.04 percentage points to 16.95% [12][13] Store Expansion and Structure Optimization - In Q3 2025, the company opened 387 new stores, resulting in a net increase of 233 stores, bringing the total number of stores to 7,501 [12][13] - The proportion of mid-to-high-end hotels increased by 0.3 percentage points to 29.6%, and the room count proportion rose by 0.4 percentage points to 42.5% [12][13] - The company has a reserve of 1,672 stores, with 71% being standard management hotels, laying a solid foundation for future expansion and structural optimization [12][13]

Core Viewpoint - The company experienced a slight decline in revenue but achieved a significant increase in net profit during the first half of 2025, indicating improved profitability despite revenue challenges [1][3]. Revenue and Profitability - In the first half of 2025, the company reported revenue of 3.661 billion yuan, a year-on-year decrease of 1.93%, while net profit attributable to shareholders reached 397 million yuan, reflecting a year-on-year growth of 11.08% [1]. - For the second quarter of 2025, revenue was 1.896 billion yuan, showing a year-on-year increase of 0.42%, and net profit was 254 million yuan, up 7.37% year-on-year [1]. Store Expansion and Structure - The company opened 664 new hotels in the first half of 2025, marking a 17.1% increase year-on-year, with 189 new mid-to-high-end hotels and 189 new economy hotels [2]. - By the end of the second quarter, the proportion of mid-to-high-end hotels increased to 29.3%, up 1.3 percentage points year-on-year [2]. - The company continued its light management expansion model, opening 286 light management hotels, which accounted for 43.1% of new openings, bringing the total number of hotels to 7,268 by the end of the second quarter [2]. Operational Performance - The overall revenue per available room (RevPAR) for all hotels decreased by 5.7% year-on-year in the second quarter, with both average daily rate (ADR) and occupancy rate (OCC) facing pressure [2]. - Mid-to-high-end hotels saw a RevPAR decline of 7%, with ADR and OCC down 4.8% and 1.6 percentage points, respectively [2]. - Economy hotels experienced a RevPAR decrease of 2.3%, with ADR and OCC down 0.4% and 1.3 percentage points [2]. - Light management hotels also faced challenges, with RevPAR down 8.8%, and ADR and OCC decreasing by 4.6% and 2.3 percentage points, respectively [2]. Profitability Enhancement - The company improved its gross margin to 38.33%, an increase of 0.75 percentage points year-on-year, attributed to reduced material consumption and energy costs due to a decline in the number of direct-operated hotels [3]. - The overall expense ratio decreased by 0.79 percentage points to 24.02%, with sales expenses rising due to increased OTA orders and membership income, while management expenses decreased due to cost control [3]. - The net profit margin increased by 1.68 percentage points to 11.5% [3]. Future Outlook - The company plans to open 1,500 new hotels in 2025, aiming to accelerate its expansion and enhance hotel product offerings [4]. - There is significant potential for further expansion of mid-to-high-end hotels in lower-tier markets, supported by a strong pipeline of existing stores [4]. - Projected net profits for 2025-2027 are 910 million, 1.046 billion, and 1.183 billion yuan, with corresponding price-to-earnings ratios of 19, 16, and 14 times [4].