Hong Kong_China Leisure & Lodging_ Results Preview_ Okay 4Q24; But Reset in 1Q25

Summary of Conference Call Notes Industry Overview - Industry: Hong Kong/China Leisure & Lodging - Key Companies: H World Group Ltd (HTHT.O), Atour Lifestyle Holdings Ltd (ATAT.O), Jin Jiang International Hotels (600754.SS), BTG Hotels Group Co Ltd (600258.SS) Core Insights and Arguments 1. 4Q24 Results Expectations: Slightly better than market estimates due to stronger hotel demand in late December, but guidance for 1Q25 is expected to be lower due to recent weak data [1][3] 2. RevPAR Growth Adjustments: - Industry RevPAR growth forecast for 1Q25 revised down from +1% YoY to -2% YoY based on recent performance [3] - Specific company adjustments include: - H World: EPS estimates down by 1-2% [3] - Atour: 1Q25 RevPAR growth assumption lowered from -2% YoY to -6% YoY [22] - Jin Jiang: 1Q25 RevPAR growth assumption lowered from -2% YoY to -5% YoY [25] 3. 4Q24 Performance Metrics: - H World expected to report 6% YoY revenue growth, with adjusted EBITDA growth of only 1% YoY when excluding impairment losses [8] - Atour projected to show strong revenue growth driven by retail, with core net income growth of 37% YoY [8] - Jin Jiang anticipated to face revenue decline exacerbated by rising costs and RevPAR underperformance [8] - BTG expected to report a 4% YoY decline in revenue for 4Q24 [8] 4. Operating Leverage and Margin Pressure: High operating leverage in the hotel industry continues to pressure margins, with fixed costs growing YoY [6] 5. Market Sentiment: Guidance and trends for 1Q25 and 2025 will significantly influence market sentiment, with March 2025 showing disappointing results despite a low base [6] Additional Important Insights 1. Price Target Adjustments: - H World price target lowered from US$46.00 to US$45.00 due to reduced 1Q25 RevPAR estimates [3][21] - No changes to bull and bear case scenarios for H World [21] 2. Earnings Preview: - H World’s total revenue for 4Q24 expected at Rmb5,859 million, with a profit after tax of Rmb875 million [10] - Atour’s total revenue for 4Q24 expected at Rmb1,970 million, with a core net income of Rmb294 million [13] - Jin Jiang’s total revenue for 4Q24 expected at Rmb3,332 million, with a net profit of Rmb78 million [16] - BTG’s total revenue for 4Q24 expected at Rmb1,802 million, with a net profit of Rmb37 million [17] 3. Future Projections: - H World’s adjusted EBITDA for 2024E projected at Rmb6,288 million, with net income of Rmb3,856 million [20] - Atour’s adjusted EBITDA for 2024E projected at Rmb1,643 million, with net income of Rmb1,239 million [23] - Jin Jiang’s total revenue for 2024E projected at Rmb14,123 million, with net income of Rmb1,079 million [28] - BTG’s total revenue for 2024E projected at Rmb7,691 million, with net income of Rmb758 million [27] Conclusion The conference call highlighted a cautious outlook for the Hong Kong/China leisure and lodging industry, with several companies adjusting their revenue and profit expectations downward for 1Q25. The impact of operating leverage and rising costs continues to pressure margins, while market sentiment will be heavily influenced by upcoming guidance and performance trends.