\u3000\u3000 Zhejiang Ssaw Boutique Hotels Co.Ltd(301073) (301073)
I. Zhejiang Ssaw Boutique Hotels Co.Ltd(301073) : high quality, medium and high-end, high-quality, small and beautiful. Founded in 2005, Junting was listed on the new third board in 2016 and the second listing on the gem in 21. It has always focused on the medium and high-end selected service hotel market. In 19 years, the company had a revenue of 337 million yuan and a net profit attributable to the parent company of 72 million yuan. The normalized profit margin of 19% and roe30% were higher than the industry average. The company’s four brands cover the public to medium and high-yield customer groups, and the normalized ADR exceeds 400 yuan. The high-end brand ADR in first tier cities can be comparable to luxury hotels. As of September 21, the company had a total of 47 hotels, including 16 directly operated and joint ventures, accounting for 34% and contributing more than 80% of revenue and profit. The company started from Hangzhou and expanded to the surrounding areas. At present, 41 stores in the Yangtze River Delta account for 82%. With the improvement of brand strength and fund-raising, it is expected to move from the region to the whole country in the future.
II. Hotel industry: medium and high-end upgrading and differentiated competition. In the past decade, the growth rate of hotel supply in China has decreased from 31% to 9%, and that in high-speed cities has decreased to 1% in 19 years. The development theme has changed from increment to quality improvement. By the end of the 20th century, nearly 80% of China’s mid-range and below hotels accounted for. Compared with 30% in the United States, China’s medium and low-end hotels had a large volume and large space for structural upgrading. Medium and high-end brands started 10 years later and have only developed for 10 years. At present, the pattern is scattered, and CR10 is only 26.4%. Multi brand dislocation competition and development share the dividend of structural upgrading. In 20 years, the growth rate of room volume of 6 of CR10 exceeds 20%.
III. highlights of the company: the team’s ingenious thinking sublimates the brand advantages, and high-quality customers accumulate strength for the exhibition store. Team advantages: the founder has worked for 35 years and accumulated rich experience in high-end hotel operation and development. The core team comes from Junlan system, with years of cooperation and tacit understanding. The newly appointed general manager has international hotel management experience and strong alliance to accumulate strength for Junting brand to accelerate store expansion. Development advantages: the company has accumulated rich experience in the development of medium and high-end hotels. The project development system is complete, the success rate of opening a store is high, and the resilience of a single store under the selected location is stronger. During the epidemic period, the company maintains a gross profit margin of 25% and a net profit margin of 13%, significantly leading the industry. The quality of its stores drives the start of entrusted management business, and the number of entrusted management increased from 15 to 27 in 18-20 years. Management advantages: Junting brand pioneered bas (bed / Art / service) selection service mode, which achieved the balance between user experience and profitability through years of accumulation. The gross profit margin increased from 29% to 35% in 13-19 years. At the same time, the cost control ability continued to improve, and the net profit margin increased from 5% to 19% in the same period. Before the epidemic, the normalized gross profit margin exceeded the industry leader Huazhu. Customer source advantage: the direct selling mode improves the efficiency of customer booking and increases the stickiness. The proportion of direct selling has increased from 45.6% to 53.8% in 18-20 years; The company has actively expanded channels and accumulated loyal customers. By the end of 20 years, the number of members has reached 490000.
IV. future highlights: endogenous and extension complement each other, see “small and beautiful” attack “wide and fine”. Based on the high-quality single store model (the average annual revenue / contribution gross profit of single store in 19 years is 2292 / 7740000 yuan, and the profit and loss will be balanced within 2 years after opening), the company plans to speed up the pace of opening stores after listing and fund-raising. In January 22, the company developed in coordination with Junlan department, bringing nearly 200 hotels to be built / contracted (as of 21q3, there are only 47 hotels under the company), and the opening performance of subsequent new stores is flexible. The entrusted management charges based on GOP mode. In 21 years, affected by the epidemic, the income of the entrusted management stores is less than 400000 / year. We expect it to reach 1 million / year under normalization. After listing, strengthen the digital construction to strengthen the management and expansion capacity of the hotel group, invest 20.38 million yuan to build an information-based comprehensive management platform, and integrate the three functions of model display, design and information, which will significantly improve the efficiency of exhibition stores and cross regional operation ability.
V. profit forecast and valuation suggestions: we expect that the number of directly operated hotels of the company will reach 16 / 18 / 20 respectively from 21 to 23, and the number of entrusted management hotels of Junting series hotels will reach 34 / 94 / 184 respectively; The revenue will reach 278 / 541 / 708 million yuan, with a year-on-year growth rate of 8.7%, 94.5% and 30.9% respectively; The net profit will reach 36 / 106 / 164 million yuan, with a year-on-year growth rate of 2.8%, 193.6% and 55.0% respectively. Zhejiang Ssaw Boutique Hotels Co.Ltd(301073) deeply cultivate the field of medium and high-end hotels. From the current point of view, in the future, the competitiveness will be stronger under differentiation, the performance CAGR will be higher under small volume, and the performance elasticity will be greater under GOP mode. Our valuation of Zhejiang Ssaw Boutique Hotels Co.Ltd(301073) 35x corresponds to a net profit of 164 million yuan in 2023, with a total market value of 5.74 billion yuan and a share price of 71.3 yuan / share. It is given a “buy” rating for the first time.
Risk warning: repeated outbreaks in some areas; The expansion of entrusted management is less than the expected risk; Rising rent and labor costs reduce profits; Market competition intensifies risks; A shares are different from American shares and other overseas markets, and different valuation methods lead to valuation differences.
