Xiaomo: Industry consolidation is more beneficial for Huazhu Group-S (01179) and ATAT.US (ATAT.US) to maintain “gain” ratings

The Zhitong Finance App learned that J.P. Morgan Chase released a research report saying that in the past month, there was a marked divergence in the trend of Chinese hotel stocks. Huazhu Group-S (01179) and Jinjiang Hotels (600754.SH) performed well, while ATAT.US (ATAT.US) and First Travel Hotel (600258.SH) outperformed the industry. The bank believes that not all changes in stock prices are supported by fundamentals, as Xiaomo's China Hotel tracking data shows that Huazhu Group's average rentable room revenue (RevPAR) in the fourth quarter of this year is at an upward risk, and there is room for the stock price to rise in the short term; however, the average rentable room revenue of Jinjiang Hotel may be more lackluster than reflected in its stock price.

Xiaomo said that so far this year, the performance of Huazhu Group and Yaduo (up 41% and 59% respectively) is significantly superior to Jinjiang Hotels and First Travel Hotels (down 2% and 7% respectively), but investors are still advised to “increase” Huazhu Group and Yaduo Hotels over a 12-month period, as their stronger brands and products bring clear long-term growth prospects, and the valuation is consistent with Jinjiang Hotel and First Travel Hotel, and is even cheaper.

Key points drawn from the Xiaomo Consumer Forum show that the hotel industry's self-discipline beats expectations, which is beneficial to Huazhu and Yaduo. Xiaomo's tracking data also shows that of the four hotels it covers, the number of new guest rooms all slowed down in the fourth quarter of this year. Since the beginning of the year, Huazhu and Yaduo have expanded significantly faster than Jinjiang Hotel and First Travel Hotel, indicating that the trend of industry integration is more beneficial to Huazhu and Yaduo.