CICC lowers the 2024/2025 EBITDA (including associated companies) of Shangri-La Asia by 14%/15% to $0.812/$0.843 billion.
According to the research report released by CICC, it maintains the "outperform" rating for Shangri-La (Asia) (00069), and considers the cost increase due to the opening of new projects and staff recruitment, it lowers the 2024/2025 EBITDA (including associated companies) by 14%/15% to $0.812/$0.843 billion. Based on the downward shift of industry valuation, the target price is downgraded by 16% to HKD 6.3. The company's 1H24 performance is slightly lower than the bank's expectations.
CICC's main points are as follows:
In 1H24, RevPAR in mainland China declined by about 1%.
In the first half of the year, overall RevPAR increased by about 1% (recovering to about 95% of the same period in 2019), while RevPAR in mainland China declined by about 1% (OCC increased by 1 ppt, and ADR decreased by 2%), recovering to about 90% of the same period in 2019. The performance of different-tier cities in mainland China showed some differentiation: RevPAR in first-tier cities increased by about 3% (OCC increased by 2 ppt, and ADR remained nearly flat), mainly due to the continuous recovery of inbound tourists (according to statistics from the National Immigration Administration, the number of inbound foreigners at various ports in the first half of the year increased by 152.7% to about 14.635 million, recovering to about 61% of the same period in 2019; the China Tourism Academy predicts that the number of inbound foreign tourists in 2024 may recover to more than 80% of 2019); RevPAR in second-tier cities remained flat, and RevPAR in third-tier and fourth-tier cities declined by about 6% due to the higher base and the diversion of outbound tourists (OCC increased by 1 ppt, and ADR decreased by about 10%). At the same time, the company mentioned that China's outbound tourism growth may have a positive impact on Southeast Asia and other regions, and it is recommended to pay attention to the dual catalysts brought by the recovery of inbound and outbound tourism in the second half of the year.
RGI index shows better operation than peers; pay attention to the new dual-brand expansion model.
1) STR shows that the company's own hotel RGI index (Revenue Generating Index) in 1H24 is 102.3, and in mainland China is 107.3, indicating better operational performance compared to other hotels of the same type in the market. 2) The JEN hotel in Kunming has opened in April, and this property adopts a dual-brand model, with approximately 80% of the rooms under the JEN brand and 20% under the Shangri-La brand (planned to open in 2025). In addition, the Hongqiao Airport project also plans to adopt a dual-brand strategy (Shangri-La brand and Trader brand), and the company plans to open around the end of 2024. It is recommended to pay attention to the operational effectiveness of the new dual-brand expansion model.
Risk
Consumer recovery is below expectations; entry and exit recovery is below expectations; progress of construction projects is below expectations.