BTG HOTELS(600258):HOTEL OPENING PLAN PROCEEDS SMOOTHLY;WATCH “AIR” HOTELS IN LOWER-TIER CITIES AND SMALL-SIZED HOTEL MARKETS

类别:公司 机构:中国国际金融股份有限公司 研究员:Sijie LIN/Linggang JIANG/Haiyan GUO 日期:2022-05-06

  1Q22 results largely in line with our expectation

    BTG Hotels announced 1Q22 results: Revenue fell 4.64% YoY to Rmb1.21bn, net loss attributable to shareholders was Rmb232mn (vs. Rmb182mn in 1Q21), and recurring net loss attributable to shareholders was Rmb259mn (vs. Rmb190mn in 1Q21). The firm’s 1Q22 results are largely in line with our expectation.

      Business operations: In 1Q22, the firm’s blended RevPAR recovered to about 61% of the 1Q19 level (vs. 71% in 4Q21, 71% in 3Q21), overall average daily rate (ADR) dropped 7.6% compared with 1Q19, and occupancy rate fell 26.1ppt compared with 1Q19. The same-hotel RevPAR recovered to 89.5% of the 1Q21 level and 58% of the 1Q19 level. The company opened 190 new hotels, implying a net opening of 77 hotels. As of end-1Q22, the firm had 5,993 hotels in operation and 1,827 hotels in the pipeline.

      Trends to watch

      RevPAR recovery slows in April dragged by the pandemic; hotel opening plan proceeding. In 1Q22, the RevPAR of HomeInn recovered to 65% of the 1Q19 level (65%, 70% and 61% over January-March), exceeding the industry average recovery (56%, 62% and 45% over January-March). Over April 17-23, the weekly RevPAR of the hotel industry only recovered to 44% of that in the same period of 2019, due to the COVID-19 resurgence in a handful of regions in China. In April, the RevPAR of HomeInn recovered to 55% of that in the same period of 2019. The impact of the pandemic remains uncertain in the short term, in our view. In 1Q22, the firm opened 190 new hotels (vs. 184 hotels in 1Q21) and it had 1,827 hotels in the pipeline (vs. 1,791 hotels in 4Q21). The company will likely open 1,800-2,000 new hotels in 2022. We suggest keeping an eye on hotel openings.

      “Air” hotels to penetrate into lower-tier cities and small-sized hotel markets; watch openings and business operations. The average number of rooms in an “Air” hotel continued falling QoQ in 1Q22 (50 in 3Q21, 48 in 4Q21, and 47 in 1Q22), as “Air” hotels continued to expand into lower-tier cities and small-sized hotel markets. Smaller hotels have faced headwinds from the COVID-19 pandemic over the past two years, in our view. In 2020, the number of hotel industry supply in China fell by about 59,000 YoY, of which 88% were hotels with 70 and below rooms (about 52,000 hotels). We think the company can monitor the needs of franchisees and make “Air” hotels more effective in improving small- and medium-sized hotels through the following three methods. The firm continues to enhance professionalism in product, service and marketing; to improve digitization technologies; and to enhance its execution competency (it can rapidly analyze management conditions and make adjustments, based on the needs of customers and the results of hotel operation). We think the “Air” hotel is the firm’s innovative attempt to solve the pain point of affiliating small-sized hotels, and we suggest watching the opening pace of “Air” hotels and efforts to enhance the operating efficiency of small- and medium-sized hotels.

      Financials and valuation

      We cut our earnings forecasts by 123% to -Rmb73mn for 2022 and by 20% to Rmb923mn for 2023, to reflect the impact of the COVID-19 resurgence in China. We maintain our TP of Rmb26.00, as the firm's earnings will likely rebound as its continued expansion and the impact of the pandemic eases. The stock is trading at 29x 2023e P/E. Our TP implies 32x 2023e P/E, offering 10.5% upside. Maintain OUTPEROFRM.

      Risks

      Negative impact from COVID-19 worse than expected; hotel expansion slower than expected.