Citi has issued a research report indicating that H World Group’s (01179) second-quarter results exceeded expectations, with revenue growing 10.8% year-on-year to RMB 7.1 billion, surpassing both the bank’s and the market’s forecasts by 4.3% and 4.7%, respectively. Adjusted net profit rose 26.9% year-on-year to RMB 1.71 billion, beating expectations by 4.7% and 8.2% compared to Citi’s estimates and market consensus.
Citi has made slight adjustments to its earnings forecasts, raising the target price for H World Group's Hong Kong-listed shares from HK$46 to HK$47, and for its US-listed shares (HTHT.US) from US$58 to US$59, while maintaining a "Buy" rating on both. The bank attributes the better-than-expected performance primarily to robust growth in management and franchising (M&F) revenue, which surged 25% year-on-year, driven by enhanced supply chain and service support for franchisees. Additionally, revenue per available room (RevPAR) trends remained resilient, increasing 1.1% year-on-year, and government subsidies also contributed to the positive results.
The company has maintained its guidance for a slight year-on-year growth in China RevPAR, as well as its full-year gross target of opening 2,200 to 2,300 new hotels. At the same time, it has raised its full-year revenue growth guidance to a 4% to 8% year-on-year increase, up from the previous 2% to 6%. Specifically, the revenue growth guidance for H World China (HWC) has been lifted from 5% to 9% to 7% to 11%, while the M&F revenue growth guidance has been increased from 12% to 16% to 16% to 20%.
During the second quarter, the group announced a cash dividend of US$275 million and repurchased US$273 million worth of shares in the first half of the year. With the early completion of its 2024 shareholder return program (US$2 billion), the group has unveiled a new three-year shareholder return plan totaling US$2.5 billion.