\u3000\u3000 Zhejiang Ssaw Boutique Hotels Co.Ltd(301073) (301073)
[matters]
The company announced on January 21 that it plans to invest 140 million yuan to acquire 79% equity of Zhejiang Junlan Hotel Management Co., Ltd. (price: 66 million yuan), 70% equity of Jinglan Hotel Investment Management Co., Ltd. (price: 14 million yuan) and "Junlan" series trademarks (price: 60 million yuan). On February 8, an announcement was issued to reply to the attention letter of Shenzhen Stock Exchange on issues related to this acquisition.
The company released the performance forecast for 2021. It is estimated that the annual net profit attributable to the parent company will be 36 ~ 38 million yuan, with a year-on-year increase of 3.0% ~ 7.5%; The net profit deducted from non parent company was 31 ~ 32 million yuan, with a year-on-year increase of 1.5% ~ 5.3%. The net profit attributable to the parent company in Q4 alone was 2.39-3.99 million yuan, with a year-on-year increase of - 85.82% - 76.32%. The operation of Q4 was affected by the repeated epidemic.
[comment]
Focus on medium and high-end hotels, with stable operation before the epidemic. Zhejiang Ssaw Boutique Hotels Co.Ltd(301073) was established in 2007, focusing on the urban agglomeration in the Yangtze River Delta, focusing on the operation and management of medium and high-end chain service hotels, with oriental cultural characteristics and artistic design advantages. Before the outbreak of covid-19 epidemic, the company's revenue and performance increased steadily. From 2013 to 2019, the company's revenue CAGR was 12.74% and the net profit attributable to the parent company CAGR was 44.22%; In 2019 / 2020 / 2021q1-3, the company achieved revenue of 382 million yuan / 256 million yuan / 212 million yuan and net profit attributable to parent company of 72 million yuan / 35 million yuan / 34 million yuan respectively. In 2021q4, affected by the repeated covid-19 epidemic, the company's operation is limited. It is expected to realize the net profit attributable to the parent company of 36-38 million yuan in 2021, with a year-on-year increase of 3.0% - 7.5%.
Mainly direct hotels, with high gross profit margin of entrusted management. From 2017 to 2020, the company's direct revenue accounted for more than 90%, and the direct / entrusted management revenue accounted for 94.20% / 5.80% respectively in 2020. The direct hotel revenue includes accommodation services, catering services and other supporting services, and the entrusted management business revenue includes preliminary technical service fees, basic management fees and performance management fees based on Hotel GOP. In terms of gross profit margin by business, the gross profit margin of direct hotels in 2018-2020 was 34.54% / 33.76% / 21.96% respectively, and the gross profit margin of entrusted management business was 48.93% / 61.96% / 76.83% respectively. The gross profit margin of entrusted management increased rapidly and was higher than that of direct hotels. Therefore, the contribution of entrusted management business to gross profit has gradually increased, accounting for 3.94% / 6.92% / 17.72% from 2018 to 2020 respectively. Although the company's original hotels are small in scale, they operate stably, and pay attention to the performance management of entrusted hotels. Junting brand has a good reputation and reputation in the Yangtze River Delta, and it is expected to remain stable in the future.
The operation of direct hotels is stable, and the entrusted hotels maintain growth. At the end of 2018 / 2019 / 2020 / September 2021, the company has opened 15 / 16 / 16 / 15 direct hotels and 15 / 23 / 27 / 32 entrusted hotels respectively, and the entrusted management stores have expanded in an orderly manner. Before the epidemic, the operation of direct hotels was stable. The average values of RevPAR, ADR and OCC in 2016-2019 were 292.06 yuan / room night, 422.15 yuan / room night and 69.18% respectively. Due to the company's positioning of medium and high-end, ADR remained at a high level.
We believe that the main highlights of this acquisition are as follows:
1) business collaboration forms complementarity, and team homology accelerates integration. Junlan Hotel acquired this time was established in 2007, mainly engaged in the management of high-end resort hotels. Jinglan hotel was established in 2015, mainly engaged in the operation and management of high-end community life hotels. The high-end brands acquired this time are mainly asset light, complementary to the original medium and high-end hotels directly operated by Junting, which helps the company establish a group brand matrix. The founder of Junlan is also Mr. Wu Qiyuan, chairman of Zhejiang Ssaw Boutique Hotels Co.Ltd(301073) . The common corporate culture and business philosophy are expected to ensure the rapid integration of different brands.
2) increase the company's performance. According to the announcement of the company, the revenue of Junlan hotel from 2022 to 2024 is expected to be 68 / 80 / 91 million yuan respectively, and the CAGR from 2022 to 2026 is 11.91%; The net profit from 2022 to 2024 is RMB 15 / 19 / 24 million respectively, and the CAGR from 2022 to 2026 is 16.27%. It is estimated that the revenue of Jinglan hotel from 2022 to 2024 will be 27 / 30 / 34 million yuan respectively, and the CAGR from 2022 to 2026 will be 10.27%; From 2022 to 2024, the net profits were -1.85/84.22/2.0318 million yuan respectively. After this acquisition and consolidation, it will directly contribute to the performance of the group.
3) ranking jumped, regional expansion, market share and brand influence increased. Zhejiang Ssaw Boutique Hotels Co.Ltd(301073) is concentrated in the urban agglomeration of the Yangtze River Delta, with a total of 47 hotels by the end of September 2021; Junlan Hotel currently covers 23 provinces and cities, with a total investment and management of more than 180 hotels; Jinglan Hotel currently covers 13 provinces and cities, and has invested and managed 75 hotels in total. After this acquisition, Zhejiang Ssaw Boutique Hotels Co.Ltd(301073) will be transformed from a regional brand into a national hotel group, with the scale increasing to more than 300 stores. At the end of 2020, the scale of Zhejiang Ssaw Boutique Hotels Co.Ltd(301073) ranked 49th. After acquiring Junlan and Jinglan, the ranking jumped to 13th, becoming a leading enterprise in China's medium and high-end hotels, especially high-end hotels. We believe that the company's acquisition of mature asset light brands is conducive to the subsequent expansion of store scale and the further improvement of market share, so as to continuously enhance the company's competitiveness in China's medium and high-end hotel market.
[investment advice]
After acquiring Junlan, the company is expected to become a national leading enterprise in medium and high-end hotels. It is optimistic about the efficient integration under the homologous management team and the subsequent scale expansion under the strong brand power. We expect that from 2021 to 2023, the company's operating revenue will be RMB 284 / 472 / 651 million respectively, with a year-on-year growth rate of 11.06% / 65.82% / 38.00% respectively; The net profit attributable to the parent company was 37 / 86 / 125 million yuan respectively, with a year-on-year growth rate of 4.30% / 13.07% / 46.46% respectively; EPS is 0.45/1.06/1.56 yuan respectively; The corresponding PE is 125 / 53 / 36 times respectively, and is rated as "overweight".
[risk tips]
Repeated epidemics have led to a less than expected recovery of the tourism market;
The acquisition process is not as expected;
The competition between middle and high-end hotels intensifies.
