\u3000\u3000 Shanghai Jin Jiang International Hotels Co.Ltd(600754) (600754)
The hotel scale ranks first in China, and M & A has achieved a leading position
Shanghai Jin Jiang International Hotels Co.Ltd(600754) is the earliest established hotel management company in China with a long brand history. Thanks to the mergers and acquisitions of hotel groups such as Louvre, Pt Tao and Vienna in 2014-16, the company achieved rapid growth in revenue / net profit attributable to parent company in 2013-19 (CAGR ~ 35% / 29%). By the end of September 21, the company has opened 10200 hotels, which is the largest hotel enterprise in China and the second largest hotel enterprise in the world.
The industry is expected to start a boom upward cycle after the epidemic, and the medium and long-term growth logic is clear
China’s hotel industry is at the starting point of a new business cycle. The optimization of short-term supply and demand and the slowdown of medium and long-term supply are expected to drive the industry upward in the next 3-5 years. At the same time, the logic of volume and price improvement of Chinese chain hotel companies is clear. Under the trend of chain (China 31% vs the United States 70%), the head chain hotel group is expected to rely on the advantages of brand scale to attract single hotels to join, drive the double improvement of chain rate and concentration, and smooth the impact of periodic fluctuations on the profits of chain hotel groups. In addition, the improvement of residents’ income and the profit demands of franchisees are expected to drive the upgrading of hotel product structure to medium and high-end, and the industry ADR still has 1.6-2 times the room for improvement.
Jinjiang takes the lead in scale and brand advantages, focusing on the medium and high-end market with resources
The company took the lead in completing large-scale mergers and acquisitions in the industry, which has a significant first mover advantage over its competitors. With the high-quality brands of Botao and Vienna obtained through M & A, the company currently ranks first in the market share of middle-end chain hotels in China. In the medium and high-end market, the company has concentrated resources and equipped with a strong development team to speed up the layout through Hilton huanpeng and Vienna International. In addition, Jinjiang International, the controlling shareholder, has completed the acquisition of Radisson group. In the future, the company is also expected to strengthen its advantages in the medium and high-end chain hotel market with the help of the high-quality medium and high-end hotel brand resources of Radisson group, the controlling shareholder.
The deepening of internal reform is expected to boost the rapid growth of performance
The reform of the company after M & A in 2016 was promoted slowly, but it has improved since 2020. In addition to setting up Jinjiang China in terms of organizational structure, realizing the integration and optimization of middle and back office resources and accelerating the asset light transformation, it also increases the market-oriented vitality by retaining the incentive system of Botao and Vienna at the front end. With the deepening of the internal reform of the organization and the technology empowerment of “one center and three platforms”, we expect that the company is expected to complete the development plan of 15000 stores in 2023, and its performance is expected to double that in 2019.
Earnings forecast, valuation and rating
It is estimated that the company’s EPS in 21-23 years is 0.14/1.32/1.95 respectively, the CAGR in three years is 24% (starting from 19 years, excluding 20 years), and the corresponding PE is 402 / 43 / 29. Based on the absolute and relative valuation methods, we give the company a target price of 65.33 yuan and an “overweight” rating.
Risk tips
Risk of recurrent outbreaks; The risk of intensified industry competition; Store expansion speed is lower than expected; Consolidation was lower than expected.
