Guidance raised again plus massive dividends

亚朵(ATAT)\r

The hotel sector continues to be under pressure in3Q24E and we are stillcautious about a potential improvement in4Q24E.However,Atour’s retail salesbusiness and better-than-expected sales of hotel supplies can still more thanoffset the drags from its hotel segment.Moreover,the new dividend payoutpolicy is a big positive surprise and could raise its FY24E yield to around3%to4%.Based on the raised guidance for sales growth and new store openings,wemaintain BUY and raise TP to US$29.42,based on23x FY24E P/E(unchanged)vs current valuation of15x.\r

Hotel segment’s3Q24E outlook is still tough before a potentialimprovement in4Q24E.Due to the high base last year,the hotel industryRevPAR fell by10%+in Jul-Aug2024.But according to management,Atour’s RevPAR is better than peers(CMBI is estimating a HSD drop)whilethe RevPAR trend is even more stable for the mature stage hotels(outperforming the ramp-up stage hotels by LSD).All in all,we areforecasting a HSD/LSD drop in RevPAR for the hotel segment in3Q24E/4Q24E,and hence the recovery rates(vs2019)will be at107%/107%respectively.\r

The retail business sales growth continues to be explosive.GMVgrowth for retail business was at160%+in2Q24and the sales mix from e-commerce was at about90%.Such explosive growth was driven by strongbrand equity and the product category expansion(to other bedding productslike duvet,etc.).During the618Festival,Atour planet’s sales was extremelysuccessful,where new products like the Deep Sleep Lightweight Comforter(the Summer Cooling Quilt)has become the no.1hot selling item on variousplatforms like Tmall,JD.com as well as Douyin.And we are still confidentabout3Q24E,esp.when the Company has rolled out another ground-breaking product in July,the Deep Sleep Thermo-Regulating ComforterPRO.Margin-wise,the retail business GP margin/OP margin was at53%+/10%+in2Q24,where the OP margin was still lower than the hotel segmentbut has already improved from the HSD in1Q24.\r

The FY24E guidance has been raised once again.The Company is nowforecasting its sales growth to be at48%to52%in FY24E(from the40%in1Q24and30%in FY23),mostly driven by the overwhelming growth fromthe retail business,which is now targeting100%growth in FY24E(from80%in1Q24and50%in FY23),while the outlook for the hotel segment couldremain largely unchanged.In terms of margin,we believe the GP margincould be at40%+and NP margin to be at18%+in FY24E.\r

Source:Company data,Bloomberg,CMBIGM estimates\r

MORE REPORTS FROM BLOOMBERG:RESP CMBROR http://www.cmbi.com.hk\r

Store opening continues to accelerate and the FY24E targetthe new store formats(e.g.Atour4.0and Atour light3.0)Atour has opened110new hotels and total number hasrepresenting a37%YoY increase,accelerated from theManagement is now targeting a400new hotel openings inhotels previously),which is consisted of roughly270for Atour,55Atour S and others.The number of hotels under developmentwhich is a36%YoY increase,indicating a stable and healthyfranchisee,even under a worsening industry environment.Wesuccess from the new hotel formats.For those Atour light3.0months or more,the RevPAR can be as high as RMB310.signings in2Q24,accounting for around20%of the total newthe first Atour4.0hotel was finally opened in Xian in Jun2024,its first month of operation has already exceed RMB710,withThere have been already50new signings since then in3Q24E.\r

2Q24result was a slight beat.But the new dividend policySales surged by64%YoY to RMB1.8bn in2Q24,beatingconsisted of:1)robust retail business sales growth,2)supplies and3)the7%drop in hotel segment RevPAR(vsthe net profit also increased by27%YoY to RMB304mn in2Q24,by8%,helped by the beat in sales and GP margin,at42%Atour has also announced a new annual dividend policy,wherenot be lower than50%in the next three years.Cash dividend(or US$0.45per ADS)was also declared,equivalent to about\r

Maintain BUY and raise TP to US$29.42.We fine-tune FY24E/by0%/+3%/+3%,to factor in the:1)2Q24result beat,2)robustgrowth,3)operating deleverage from the slightly weaker hoteland4)faster-than-expected store expansion.Our new TP isP/E(unchanged).Given a33%/35%sales/net profit CAGRcurrent valuation of15x is not demanding at all,in our view.