Zhejiang Ssaw Boutique Hotels Co.Ltd(301073) (301073)
The company is the representative of China’s medium and high-end selected service-oriented hotels. After listing, the company is moving towards leapfrog development from region to country. The company focuses on the operation and management of medium and high-end selected service chain hotels, and takes the Yangtze River Delta Urban Agglomeration as the core development area; At present, its brands include “Junting” and “pagoda”, which are selected service brands with medium / high-grade positioning respectively, and “night parking Junting”, which is a holiday brand with historical and cultural tourism destination positioning respectively; By 2021q3, the number of stores had reached 43. Previously, the company adhered to the lean development strategy, expanded stores more moderately, and focused on product / brand polishing; After listing, the company is relatively rich in cash, and sees the industry opportunities brought by the industry supply side shuffle and consumption upgrading after the epidemic. In the future, it is expected to achieve high growth by relying on endogenous expansion + epitaxial M & A; In addition, after listing, the company also hired influential / experienced professional managers in the hotel industry to join, demonstrating the company’s determination to start leapfrog development.
Hotel Industry: upgrading into the fast lane, the times call for high-quality brands. The supply grade of Chinese hotels presents a typical “pyramid” from low to high. Compared with the “olive” of the mature market represented by the United States, the supply of medium and high-end hotel products is significantly insufficient. At present, on the one hand, with the increase of income level, residents’ requirements for hotel product quality / experience are also increasing; On the other hand, with the increasing pressure of rent / labor cost, hotel owners must also improve the room price by upgrading the hotel quality / brand to maximize the return on investment; In this context, medium and high-end selected service Hotels with cost performance and quality service experience are favored by consumers and investors. At present, China’s hotel leaders have begun to actively layout in this track. We are optimistic that brands with high service level will stand out.
Strengthen the product force, create an excellent single store model, adhere to the brand development route, and forge the core competitiveness. Zhejiang Ssaw Boutique Hotels Co.Ltd(301073) the management generally comes from the background of high-end hotels. Along the development path of orthodox high-end hotels, they follow the high-end service concept, concentrate on polishing the product model, gradually form the management ability / brand barrier, and realize differentiation through “high-end service & hardware + quality catering + characteristic space + brand tone”; The single store model has obvious advantages in operating data / store end profit, and has a certain brand premium. The RevPAR of Direct stores is about 20% higher than the average of China’s top 3 leaders. In addition, the company mainly carries out asset light expansion through entrusted management mode, benchmarking the leading standard of International Hotels: the stability of management fee income is high. The charging mode based on Hotel GOP is also conducive to the polishing of the company’s focus management ability, and is expected to improve the management fee income level in the future by improving the operation management ability / industry prosperity.
The acceleration of store expansion + industry prosperity restoration bring high performance flexibility, and the construction of digital platform lays a solid foundation. After the epidemic, the property points are vacant / the operation of some chain hotels is under pressure. After the company is listed, it is expected to accelerate its expansion through endogenous and extension methods; At the same time, it has invested in the construction of digital platform, made efforts to reduce costs and increase efficiency, and improved cross regional management ability, with large performance growth space. In addition, under the impact of the epidemic, the supply of China’s hotel industry has been historically cleared. Subsequently, with the recovery of the demand side, the industry will enter the upward stage of the cycle boom, and the proportion of direct sales of the company is high, which is expected to realize the performance elasticity in the boom period of the industry.
Investment suggestion: the company is the target of China’s pure medium and high-end hotel management company. Along the orthodox development path of high-end hotels, the company has gradually formed a management capability barrier and realized it as a brand premium and business advantage. It is optimistic that the company will take advantage of the wind of industry upgrading to achieve leapfrog development, expand stores through endogenous and extension, move from the region to the country, and achieve high performance growth. We expect that the company will realize a net profit attributable to the parent company of 45.33 million yuan / 98.58 million yuan / 116 million yuan from 2021 to 2023, and the corresponding PE is 69x / 32x / 27x respectively. It will be covered for the first time and given a “recommended” rating.
Risk tips: the epidemic situation is at risk of recurrence, the progress of vaccination / specific drugs is less than expected, and the expansion of stores is less than expected.
