\u3000\u3000 Zhejiang Ssaw Boutique Hotels Co.Ltd(301073) (301073)
Event: on February 8, 2022, the company issued an announcement to respond to the questions raised in the attention letter of the exchange, such as 1) explaining the necessity / synergy of M & A from a business perspective, 2) improving the quality / profitability of listed companies from a financial perspective, 3) specific integration and control measures, and related risks.
At the business level, the acquisition of Junlan / Jinglan can break through the bottleneck of scale, broaden the layout of brand categories, enhance brand influence, and realize the complementarity of customers / Models / management experience. 1) Expansion of scale / influence: Junlan hotel takes the lead in the scale / growth rate of luxury / resort hotels in China, and has realized the layout of stores in 23 provinces in China. From 2019 to 2021, the expansion of stores continues to speed up, with 22 / 35 / 41 signed and 7 / 11 / 20 opened respectively; By the end of 2021, Junlan hotel / Junlan resort had opened 64 / 36 stores and 17798 / 11465 guest rooms respectively, accounting for 3.1% / 2.0% of the luxury hotel market respectively, ranking in the forefront of Chinese brands. 2) Customer / Channel / owner resource resonance: Zhejiang Junlan and Jinglan hotels have been deeply engaged in the field of high-end hotels for many years, and the number of registered users of their loyal member program “Lanjia club” has reached 2.7 million; It has established good relations with China Petroleum & Chemical Corporation(600028) / Alibaba business travel and other agreement customers, OTA platforms such as Ctrip / meituan / Feizhu / Tongcheng Yilong, and tourism investment platforms in many places such as Vanke / Greentown / Minmetals / Hainan and Zhejiang. 3) brand / category layout widening: Jun Lan has full management experience and comprehensive service experience in high-end luxury and resort hotels, and its benchmarking projects such as Hainan perfume Bay, seven fairy ridge, deer back, Beijing five mines, Hangzhou Liangzhu resort hotels, Zhejiang World Trade Center and so on luxury hotels have formed a wide range of brand influence throughout the country. After the merger and acquisition, Junting will form a medium and high-end track, spanning two categories of vacation and business travel, and a medium and high-end multi brand matrix covering high-end tonality and stylized aesthetics. 4) Open up multiple systems in the middle and back office and release the synergy effect: after integration, it will open up multiple systems such as sharing Junting and Junlan / Jinglan’s marketing network / group procurement / talent training body / product service development, realize process optimization and collaborative development, and make use of their existing advantages to reduce the company’s operating costs such as marketing, procurement and management.
At the financial level, Junlan / Jinglan’s operating & cash flow is in good condition. In the first three quarters of 2021, Junlan achieved revenue / profit / operating cash flow of 4729.85/1384.79/1990.17 million yuan respectively, which has exceeded the whole year of 2020. The company expects to achieve a net profit of about 18.46 million / + 110.01% in 2021. Jinglan also achieved a significant year-on-year loss reduction / positive operating cash flow, and the M & A brought gain to the company’s financial data.
The company will promote effective integration / control and stabilize the management and core personnel. After integration, the company will further improve the mechanism, promote internal integration, optimize the incentive mechanism and stabilize the core personnel team. Wu Qiyuan, chairman of the company, is the founder / early helmsman of Junlan. Most of the core team members of Junting are also mainly from the original Junlan team. He is optimistic that the integration team can integrate rapidly in terms of culture / business coordination.
Investment suggestion: after the acquisition of Junlan / Jinglan, Junting will break through the bottleneck of scale, realize the layout of multiple brands / categories in the above middle and high-end stages, be optimistic about the smooth integration of the company, expand stores through endogenous and extension, take advantage of the consumption boom of resort hotels and the recovery trend of travel after the epidemic, achieve high performance flexibility and maintain the “recommended” rating. It is estimated that the net profit attributable to the parent company will be 37.35 million yuan / 88.89 million yuan / 118 million yuan from 2021 to 2023 (excluding the reference performance of the subject matter of M & A), and the corresponding PE will be 108x / 45x / 34x respectively.
Risk tip: the epidemic situation is repeated, the macroeconomic growth rate is lower than expected, and the integration is lower than expected
