Daiwa has issued a research note reaffirming its 'Buy' rating on HWORLD-S (01179), with the 12-month target price raised from HK$46 to HK$47. The new target is based on an unchanged 12 times 2026 EV/EBITDA multiple, calculated on EBITDA from the fourth quarter of 2026 to the third quarter of 2027.

The company's second-quarter revenue climbed 11% year-on-year to RMB 7.1 billion, while adjusted EBITDA surged 20% to RMB 772.5 million, beating market consensus by 9%. This outperformance was largely attributed to core EBITDA margin expansion, which widened to 38.3% from 35.3% in the same period last year. During the quarter, overall revenue per available room (RevPAR) increased 1.1% year-on-year, supported by ongoing upgrades to the hotel portfolio.

Daiwa highlighted that the 1.1% RevPAR growth outperformed both the broader Chinese hotel industry and key peer Atour (ATAT.US), primarily benefiting from structural improvements in the hotel mix. Management has maintained its full-year guidance for 'slight year-on-year RevPAR growth'. The brokerage expects RevPAR to rise 0.6% for the full year, aligning with management's outlook but potentially exceeding market expectations.

In the first half, the group added a net 677 hotels in China, down from 991 in the same period last year. Nevertheless, the company remains committed to its full-year target of 1,600 to 1,700 net new hotel openings, implying a faster pace of expansion in the second half. Daiwa forecasts a 12% compound annual growth rate in core EBITDA from 2025 to 2028, driven by continued hotel expansion, higher royalty rates, stable RevPAR, and efficiency gains from an improved hotel mix.

The group has already returned US$2 billion to shareholders between 2024 and 2026 and has announced an updated shareholder return plan for 2026 to 2028, totaling US$2.5 billion. This translates to an annual shareholder return rate exceeding 6%.