Atour: The Smart Way to Invest in China's Hospitality Market

4 дня назад

◉ Abstract
Atour Lifestyle Holdings Limited is taking advantage of China's fast-growing hotel industry. The hospitality sector of China is expected to reach $157.46 billion by 2032, growing at a rate of 8.23% each year. This growth comes from a strong economy, more people moving to cities, and an increase in travel. Atour uses a smart business model that allows for quick expansion while keeping costs low. They offer a variety of hotel brands and even sell sleep-related products.

In FY23, Atour's sales jumped to $657.4 million, a 106% increase from the previous year, along with strong earnings growth. With over 83 million members in its loyalty program and a focus on great customer experiences, Atour is set for continued success in China's hospitality market.
Overview of the Hotel Service Industry in China.

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◉ Overview of the Hotel Service Industry in China
China's hotel service industry is on the cusp of a remarkable growth spurt, fueled by the country's soaring economy, rapid urbanization, and an unprecedented surge in domestic and foreign travel.

● Projected Market Value: $157.46 billion by 2032
● Growth Rate: 8.23% Compound Annual Growth Rate (CAGR) from 2024 to 2032

◉ What's Driving this Growth?
● Economic Growth: China's economy continues to expand, boosting disposable incomes and travel budgets.
● Urbanization: As more Chinese citizens move to cities, they're seeking better travel experiences and accommodations.
● Increased Travel: Both domestic and foreign travel are on the rise, driving demand for hotels and travel services.

As China's hotel service industry experiences rapid growth, Atour Lifestyle Holdings ATAT Company has established itself as a prominent force in the market. By delivering a unique blend of comfort, style, and local charm, Atour is redefining the hospitality landscape in China.

Atour's strategic focus on mid-to-upscale hotels enables the company to provide immersive local experiences, innovative design, and exceptional service. This distinctive approach has fostered a loyal customer base and positioned Atour for continued success in China's burgeoning hotel market.

◉ Investment Advice
💡 Buy Atour Lifestyle Holdings ATAT
● Buy Range - 27 - 27.5
● Sell Target - 36 - 37
● Potential Return - 30% - 35%
● Approx Holding Period - 12-14 months

◉ Business Model
Atour Lifestyle Holdings Limited utilizes an asset-light, franchise-oriented business model that enables rapid expansion and operational efficiency in China's hotel industry. Here are the key components:
● Manachised Model: Atour primarily operates through a "manachised" model, where franchisees handle capital expenditures and hotel leases while Atour provides management and training. This approach minimizes operational costs and maximizes revenue from franchise royalties.
● Diverse Brand Portfolio: The company offers various hotel brands, including Atour, Atour S, Atour X, and ZHOTEL, catering to different market segments and customer preferences.
● Retail Integration: Atour has expanded into retail by selling sleep-related products, generating significant revenue and enhancing the guest experience.
● Customer Loyalty Programs: The A-CARD loyalty program boasts over 63 million members, driving customer retention and engagement through various benefits.
● Digital Capabilities: Atour leverages technology for a seamless customer experience, allowing easy online bookings and efficient communication during stays.
● Focus on Experience: The company emphasizes delivering unique lifestyle experiences through thematic hotels and tailored offerings.

◉ Key Competitors
1. Huazhu Group (H World Group): A leading competitor with over 10,150 hotels, Huazhu operates a similar manachised model and has been expanding rapidly, making it one of the largest players in the market.
2. Jin Jiang International: With a vast portfolio exceeding 12,000 hotels, Jin Jiang is another major competitor that employs a mix of franchising and management strategies.
3. GreenTree Hospitality Group: Focused on midscale accommodations, GreenTree operates around 3,000 hotels and utilizes a franchise-based model with manachised elements.
4. BTG Homeinns Hotels: Known for its budget offerings, BTG Homeinns has a significant presence with thousands of hotels primarily targeting domestic travelers.
5. Plateno Group (7 Days Inn): Operating primarily in the budget segment, Plateno utilizes a manachised approach to grow its network of over 3,000 hotels.

These companies dominate the domestic market, while international brands like InterContinental Hotels Group (IHG) and Shangri-La Hotels & Resorts lead the high-end segment.

◉ Strategic Initiatives Powering Atour's Growth Trajectory
● Expanded Hotel Network: 140 new hotels added in Q3 and 732 under development, increasing capacity and driving revenue growth.
● Upscale Brand Introduction: SAVHE Hotel launch in core business districts, enhancing occupancy and average daily rate (ADR).
● Retail Segment Growth: 107.7% year-over-year GMV growth in 'deep sleep' products, boosting revenue and net margins.
● Membership Base Expansion: Over 83 million members, increasing revenue potential through customer loyalty and repeated business.

◉ Revenue & Profit Analysis
● Year-on-year

➖ FY23 sales reached $657.4 million, a remarkable 106% increase from $328 million in FY22.
➖ EBITDA surged to $142 million, up from $36 million in FY22.
➖ The EBITDA margin widened to 21.6% from 11.15% in the same period.

● Quarter-on-quarter

➖ Q3 sales reached $270 million, a 9% increase from $247 million in Q2 and a 52% jump from $177 million in Q3 2023.
➖ Q3 EBITDA climbed to $72.6 million, up from $56.2 million in Q2.
➖ Q3 diluted EPS rose to $0.39 (LTM) from $0.30 (LTM) in Q2 2024.

◉ Valuation
● P/E Ratio
ATAT has a P/E ratio of 24x, which is fairly valued when compared to the peer average of 23.7x.

● PEG Ratio
With a PEG ratio of just 0.15, ATAT appears to be undervalued based on its anticipated earnings growth.

◉ Profitability Analysis
With a 30.7% ROCE, ATAT demonstrates its expertise in generating substantial profits through efficient capital allocation.

◉ Cash Flow Analysis
ATAT achieves remarkable growth in operational cash flow, rising 582% to $280 million in FY23 from $41 million in FY22.

◉ Debt Analysis
ATAT's debt-to-equity ratio stands at 0.67, signaling that debt is not a significant concern for the company.

◉ Top Shareholders

➖ Mr. Haijun Wang, CEO of Atour Lifestyle Holdings, holds a significant 19.2% stake.
➖ Trip.com Group Limited holds approximately 13.6% stake.

◉ Technical Aspects

➖ The weekly chart indicates that after a long period of consolidation, the stock price has formed a Rounding Bottom Pattern and is likely to break through its strong resistance zone soon.
➖ A Pole & Flag pattern has formed on the daily chart, with the stock price targeting higher levels following a successful breakout.

◉ Conclusion
Following a thorough analysis, we believe Atour presents a lucrative investment opportunity. With its appealing valuation, impressive financial track record, and strategic growth initiatives, Atour is well-positioned to capitalize on the growing tourism sector. The company's commitment to delivering exceptional customer experiences further strengthens its potential for long-term growth and value creation for shareholders.