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01/11 16:22
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents mixed signals: strong growth in adjusted EBITDA and membership, but declines in RevPAR and restaurant ADS. The strategic expansion into Tier 3 cities and focus on profitability are positives, yet challenges in F&M hotels and unclear guidance on dividends and RevPAR dampen sentiment. The Q&A reveals management's vague responses and lack of specific guidance, adding uncertainty. Despite optimistic revenue growth projections, the lack of clarity and RevPAR declines balance out positives, resulting in a neutral sentiment prediction.
Total Revenues RMB352.2 million, down 7.1% year-over-year.
Hotel Revenue RMB274.8 million, up 8.8% year-over-year, attributable to the recovery in the RevPAR of L&O hotels.
Restaurant Revenue RMB77.7 million, down 38.9% year-over-year, due to the execution of the strategy to reposition the business.
Income from Operations RMB72.2 million, with a margin of 20.5%.
Net Income RMB57.3 million, up 76% year-over-year, with a margin of 16.3%.
Adjusted EBITDA RMB109.4 million, up 17.2% year-over-year, with a margin of 31.1%.
Hotel RevPAR RMB114, down 4.6% year-over-year.
Restaurant ADS RMB5,525, down 8.7% year-over-year.
Total Cash and Cash Equivalents RMB1,517.3 million, up from RMB1,337.1 million year-over-year, due to improved operating performance and repayments from franchisees.
Group Net Income per ADS RMB0.58, up 63.2% year-over-year.
Core Net Income per ADS RMB0.60, up 22.3% year-over-year.
Expansion in Mid-to-Upscale Segment: We further expanded in the mid-to-upscale segment and increased our penetration in Tier 3 and the lower cities in South China.
Franchise Growth: We grew our network of franchisees as we further expanded the number of street stores.
Restaurant Closures: We have completed our closures of the restaurants in the supermarket anchored regional shopping centers due to less foot traffic to our stores.
Store Count Growth: We are focused on store count growth again in regions where we have strong brand recognition.
Revenue Increase: We delivered an 8.8% revenue increase year-over-year and a 21.1% increase in hotel adjusted EBITDA.
Profitability Improvement: Income from operations increased to RMB72.2 million, with a margin of 20.5%. Net income was RMB57.3 million, that's up 76%, with a margin of 16.3%.
Membership Growth: Individual memberships grew to 93 million, up from 78 million a year ago, and corporate memberships grew to 2.07 million, up from 1.95 million a year ago.
Restaurant Business Repositioning: We continued to reposition our Restaurant business with an absolute focus on robust profitability.
Focus on Profitability: Our strategy is three-pronged: close unprofitable L&O stores, increase the proportion of F&M stores and expand the number of street stores.
Competitive Pressures: Consumer behavior is evolving in a more competitive environment, impacting hotel business performance.
Regulatory Issues: The company mentions risks related to known and unknown factors that may affect performance, which could include regulatory challenges.
Supply Chain Challenges: Higher utilities costs and increased rental and personnel costs due to the expansion of hotels indicate potential supply chain challenges.
Economic Factors: The company has withdrawn guidance for the Restaurant business due to significant revenue unpredictability, suggesting economic factors are affecting performance.
Hotel Business Upgrades: Continuously upgrading a large portion of hotels in the portfolio to improve business metrics.
Restaurant Business Repositioning: Focus on robust profitability by closing unprofitable stores and expanding franchisee network.
Expansion in Tier 3 Cities: 71.8% of hotels in the current pipeline are in Tier 3 and lower cities, capitalizing on substantial opportunities.
Franchise and Managed Restaurants Growth: Franchised and managed restaurants accounted for 85.4% of total restaurants, up from 54.5% a year ago.
Hotel Revenue Growth Guidance: Maintained revenue growth guidance for the Hotel business at 7% to 12% year-over-year.
Restaurant Business Guidance: Withdrawing guidance for the Restaurant business due to significant revenue unpredictability.
Shareholder Return Plan: The company has not announced any share buyback program or dividend program during this earnings call.
The earnings call indicates several negative factors: a significant revenue decline due to hotel closures, increased expenses in the restaurant business, and a flat revenue forecast for 2025. Despite some positive aspects like adjusted net income increase and planned hotel expansions, the overall sentiment is negative due to economic uncertainties, competitive pressures, and lack of clear guidance on improving shareholder returns. The Q&A section highlights management's unclear responses and flat RevPAR expectations, reinforcing a negative outlook. Thus, the stock is likely to see a negative movement in the range of -2% to -8%.
The earnings call reveals a challenging financial performance with significant revenue and net income declines, alongside a cautious outlook. The Q&A section highlights industry pressures, uncertain RevPAR trends, and vague management responses, particularly regarding dividends and liquidity. Despite some optimism in future quarters, the flat hotel revenue guidance and lack of a share buyback program further dampen sentiment. The strategic review's impact and supply chain issues add to the negative outlook, suggesting a potential stock price decline in the short term.
The earnings call revealed significant financial challenges, including a 20.5% revenue decline and reduced RevPAR. Despite a cash dividend, the lack of a share buyback program and flat future guidance are concerning. The Q&A highlighted continued RevPAR declines and management's vague responses on liquidity improvement, indicating uncertainty. The withdrawal of restaurant guidance and economic pressures further contribute to a negative outlook. While the company plans to open new restaurants and maintain dividends, these positives are overshadowed by declining revenues and competitive pressures, suggesting a negative stock reaction.
The earnings call presents mixed signals: strong growth in adjusted EBITDA and membership, but declines in RevPAR and restaurant ADS. The strategic expansion into Tier 3 cities and focus on profitability are positives, yet challenges in F&M hotels and unclear guidance on dividends and RevPAR dampen sentiment. The Q&A reveals management's vague responses and lack of specific guidance, adding uncertainty. Despite optimistic revenue growth projections, the lack of clarity and RevPAR declines balance out positives, resulting in a neutral sentiment prediction.
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