\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 754 Shanghai Jin Jiang International Hotels Co.Ltd(600754) )
China’s leading hotel, asset light mode, rapid expansion Shanghai Jin Jiang International Hotels Co.Ltd(600754) is the largest hotel group company in China. Its affiliated Jinjiang International Group accounts for 19.5% of China’s hotel market. It owns the top 10 hotel brands in China, such as Vienna, 7 days and Jinjiang Star. Hotels magazine shows that Shanghai Jin Jiang International Hotels Co.Ltd(600754) ranked second in the global hotel group with 10695 hotels and 1132900 rooms in 2020. The company focuses on the limited service hotel business, pays close attention to the wave of M & A integration, and successively acquires Lufu group, Botao group and Vienna Hotel to realize rapid expansion of scale. The company continued to increase the proportion of franchise hotels. By 2021, Shanghai Jin Jiang International Hotels Co.Ltd(600754) franchise hotels accounted for 91.32%, the highest among the three major hotel groups in China, driving the rapid repair of the company’s business indicators after the epidemic.
The supply cycle is coming. After ten years of economic growth, the number of hotels in China has gradually increased, which is related to the economic growth of the middle class. At present, China is in the stage of supply integration of economy hotels and transition to medium and high-end hotels. After the de integration stage of supply since 2012 and the accelerated clearing of hotel supply since 2020 due to the covid-19 epidemic, by the beginning of 2021, the total number of facilities in China’s accommodation industry was about 447000, down about 161000 compared with the beginning of 2020, and the hotel industry may usher in an upward cycle.
The company has significant competitive advantages. (1) In recent years, the company has the highest number of newly opened hotels in China hotel group. By the third quarter of 2021, the company has opened 10195 hotels and reserved 5149 hotels. (2) Scale advantages transform the huge membership system and integrated supply chain platform to attract franchisees. (3) The global innovation center continues to incubate and upgrade brands, strengthen the company’s medium and high-end hotel matrix, and upgrade the market of low-level cities below traditional economy hotels.
Investment suggestion: maintain the “recommended” investment rating. Since the second half of 2021, the scattered epidemic situation in China has been continuously disturbed. With the initial relaxation of covid-19 epidemic prevention and control policy, a high number of new cases may still be maintained in the follow-up, and the demand for wine travel will be under pressure in the short term. However, the new covid-19 treatment plan relaxes the isolation conditions and releases a positive signal. It is expected that the inhibitory effect of subsequent covid-19 prevention and control measures on tourism demand will gradually weaken. In the long run, the demand for liquor travel has been disturbed by the scattered epidemic for three consecutive years, and the travel radius of residents has been greatly shortened. After the epidemic is controlled, it is expected to rebound significantly. The supply of the hotel industry has been continuously integrated since 2012, the epidemic has accelerated, and the clearance of small and medium-sized single hotels has increased, and the leading concentration has increased. At present, the supply of hotels has been greatly reduced, the panic of residents has been gradually weakened, and the epidemic prevention measures have continued to suppress the rebound in demand. The company’s one center and three platforms continue to promote the innovation and upgrading of hotel brands, with significant scale advantages. After the epidemic is controlled, it is expected to benefit from the upward cycle of hotels and the rise of both volume and price. Assuming that China’s overall covid-19 immunization level will reach a high level in the second half of 2022, and assuming that the epidemic prevention policy will be gradually loosened in the second half of 2022, it is estimated that the EPS in 2022 / 2023 will be 0.92 yuan and 1.86 yuan respectively, and the corresponding PE will be 53.43 times and 26.43 times respectively, maintaining the “recommended” investment rating.
Risk warning. Macroeconomic downturn, intensified competition, policy promotion less than expected, etc.
