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01/10 17:11
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents mixed sentiments. While there is positive growth in franchise revenue and asset-light strategy, challenges like RevPAR decline, tariff issues, and economic uncertainties pose risks. The cautious full-year guidance and lack of clear shareholder return plans further balance the sentiment. The Q&A section highlighted management's conservative stance and avoidance of specific guidance, contributing to a neutral outlook. Despite some positive financial metrics, the uncertainties and lack of strong positive catalysts suggest a neutral stock price movement in the short term.
Group Revenue RMB5.4 billion, increased by 2.2% year-over-year. The growth was driven by a 5.5% increase in revenue from Legacy-Huazhu, while DH revenue decreased by 11.3% due to the transformation of 10 leased hotels to franchised hotels.
Hotel Turnover Increased by 14% year-over-year.
Adjusted EBITDA RMB1.5 billion, grew by 5.3% year-over-year. Legacy-Huazhu's adjusted EBITDA increased by 5.8% year-over-year to RMB1.6 billion.
Operating Cash Flow Generated RMB580 million in operating cash flow.
Cash and Cash Equivalents RMB11.8 billion in cash and cash equivalents, with a solid net cash position of RMB6.5 billion.
Hotel Operating Costs Grew by 1.1% year-over-year, slower than revenue growth due to continued asset-light transformation.
SG&A Expenses Decreased by 1.8% year-over-year, or reduced by 4.6% year-over-year if excluding SBC, mainly benefiting from a 11.1% year-over-year decrease in SG&A expenses from Legacy-DH due to restructuring and cost optimization.
New Products: The proportion of newer products and core brands, including HanTing, JI Hotel, and Orange, has been increasing constantly.
Market Expansion: As of the end of Q1 2025, 54% of the company's hotels in the pipeline were located in Tier 3 and below cities, 11 percentage points higher than the proportion in operating hotels. The company is now covering 1,394 cities and countries, 104 more than a year ago.
Operational Efficiencies: Hotel turnover in Q1 grew 14% year-over-year. Hotel operating costs grew by only 1.1% year-over-year, slower than revenue growth.
Strategic Shifts: The company is focusing on developing differentiated strategies on products and service offerings to capture rising leisure demand, particularly targeting emerging travelers.
RevPAR Pressure: RevPAR declined by 3.9% year-over-year, attributed to an overall supply surge last year, leading to decreased ADR by 2.6%.
Tariff Issues: Tariff issues starting in April introduced uncertainties to the market outlook, with potential future volatilities.
Occupancy Rate Decline: Slight decline in occupancy rate by one percentage point, primarily due to newly opened hotels ramping up.
Economic Factors: Overall traveling demand remains resilient, but economic uncertainties could impact future performance.
Regulatory Challenges: Potential regulatory issues related to tariff changes may affect market conditions and business operations.
Supply Chain Challenges: Challenges related to the rapid opening of new hotels and proactive pipeline clearance to improve quality.
Hotel Openings: In Q1 2025, H World opened 695 hotels and closed 155 hotels, with a pipeline of 2,865 hotels.
Upper Midscale Growth: The number of upper midscale hotels in operation increased by 36% year-over-year to 933, with a pipeline growth of 22% year-over-year to 523.
Membership Growth: The member base increased to nearly 280 million, with room nights generated through the central reservation system accounting for 65.1%.
Asset-Light Model: The percentage of asset-light hotels in the pipeline is 57%, an improvement from the previous year.
Revenue Growth Guidance: For Q2 2025, the Group expects revenue growth of 1% to 5% year-over-year, and 3% to 7% excluding DH.
Manachised and Franchised Revenue Growth: Expected growth in Manachised and Franchised revenue is projected to be between 18% to 22% year-over-year.
Adjusted EBITDA: Adjusted EBITDA for Q1 2025 grew 5.3% year-over-year to RMB1.5 billion.
Cash Position: As of the end of Q1 2025, the Group had RMB11.8 billion in cash and cash equivalents.
Share Repurchase Program: The company has not mentioned any share repurchase program during the call.
The earnings call reveals strong financial performance, with significant revenue growth, improved margins, and positive cash flow. The company's asset-light strategy and network expansion are driving profitability. Although guidance for RevPAR is flattish, the overall outlook is optimistic, with a focus on quality improvements and brand expansion. The Q&A session provided additional insights into strategic initiatives, enhancing the positive sentiment. Given these factors, the stock price is likely to experience a positive movement in the short term.
The earnings call summary presents mixed signals. Strong financial metrics, asset-light strategy success, and a share buyback are positive. However, weak guidance for RevPAR, cannibalization concerns, and declining margins in the leased segment raise caution. The Q&A section further highlights uncertainties, such as macro challenges and vague guidance, which temper optimism. These factors suggest a neutral stock price reaction over the next two weeks, as positive elements are offset by significant risks and uncertainties.
The earnings call shows mixed signals: strong EPS and revenue growth in certain segments, but declining RevPAR and ADR due to supply issues. Management's cautious guidance and lack of a share buyback program further neutralize sentiment. While there are positive aspects like robust manachised and franchised revenue growth and a solid cash position, uncertainties in RevPAR and unclear guidance temper optimism. The lack of new partnerships or shareholder return plans, alongside ongoing restructuring costs, suggests a neutral outlook for the stock price in the short term.
The earnings call presents mixed sentiments. While there is positive growth in franchise revenue and asset-light strategy, challenges like RevPAR decline, tariff issues, and economic uncertainties pose risks. The cautious full-year guidance and lack of clear shareholder return plans further balance the sentiment. The Q&A section highlighted management's conservative stance and avoidance of specific guidance, contributing to a neutral outlook. Despite some positive financial metrics, the uncertainties and lack of strong positive catalysts suggest a neutral stock price movement in the short term.
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