Blue Lotus China New Economy Research, Blue Lotus Research Institute

Eric Wen

Blue Lotus China New Economy Research

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

Equity Bottom-Up

Atour Lifestyle Holdings / Equity Bottom-Up

<ul>
<li>Atour recorded steep product sales growth during 618. We raised our C2Q24 revenue by 7.5% and full year by 5.1%, driven by (1) stronger pillow sales during the 618 promotions; </li>
<li>Thanks to retail, Atour’s RevPAR after including retail sales maintained positive growth of 1.7% YoY, although pure hotel RevPAR dropped 2.9% YoY due to a decline in hotel price.</li>
<li>We raise TP by US$1 to US$36/ADS and keep the rating as BUY, factoring in the strong growth momentum of Atour’s retail business.</li>
</ul>


Atour recorded steep product sales growth during 618. We raised our C2Q24 revenue by 7.5% and full year by 5.1%, driven by (1) stronger pillow sales during the 618 promotions; 
Thanks to retail, Atour’s RevPAR after including retail sales maintained positive growth of 1.7% YoY, although pure hotel RevPAR dropped 2.9% YoY due to a decline in hotel price.
We raise TP by US$1 to US$36/ADS and keep the rating as BUY, factoring in the strong growth momentum of Atour’s retail business.


[Atour Lifestyle (ATAT US, BUY, TP US$36) Target Price Change]: 618-Commerce Sales Set a New Record

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Atour Lifestyle Holdings / Equity Capital Markets

<ul>
<li>Legend Capital (LC), one of the principal shareholders of <a href="https://www.smartkarma.com/entities/atour-lifestyle-holdings-ltd" target="_blank" data-smartkarma-citation="entities:33481:1" rel="noopener">Atour Lifestyle Holdings (ATAT US)</a>, is looking to raise around US$168m through a secondary selldown.</li>
<li>This will be the third selldown by Legend Capital in just over a year’s time. Hence, the deal is well flagged.</li>
<li>In this note, we will talk about the placement and run the deal through our ECM framework.</li>
</ul>


Legend Capital (LC), one of the principal shareholders of Atour Lifestyle Holdings (ATAT US), is looking to raise around US$168m through a secondary selldown.
This will be the third selldown by Legend Capital in just over a year’s time. Hence, the deal is well flagged.
In this note, we will talk about the placement and run the deal through our ECM framework.


Atour Lifestyle Holdings Placement - Well Flagged Deal, past Selldowns Have Done Well

<ul>
<li>Atour reported C1Q23 revenue 4.6%/6.8% higher than our est./cons., and non-GAAP NI 6.9%/8.8% higher than our est./ cons, driven by hotel expansion and new retail products.</li>
<li>The company raised total revenue guidance from 30% to 40% YoY for 2024 due to a strong retail sales trend. </li>
<li>We believe retail sales is a form of increase in Atour’s same store sales. We thus raise TP to US$39 to reflect this retail-driven increase of same store sales.</li>
</ul>


Atour reported C1Q23 revenue 4.6%/6.8% higher than our est./cons., and non-GAAP NI 6.9%/8.8% higher than our est./ cons, driven by hotel expansion and new retail products.
The company raised total revenue guidance from 30% to 40% YoY for 2024 due to a strong retail sales trend. 
We believe retail sales is a form of increase in Atour’s same store sales. We thus raise TP to US$39 to reflect this retail-driven increase of same store sales.


[Atour Lifestyle (ATAT US, BUY, TP US$39) TP Change]: Should Retail Profit Be Accorded a Multiple?

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>The hotel sector has been under pressure in 2Q24 QTD (post-holidays leisure demand is weak and business recovery is slow), and therefore, the outlook is still conservative.</li><li>However, Atour’s retail business has performed well to more than offset this drag. Hence with a healthy retail sales growth target upgrade, we maintain BUY and raise TP to US$27.72, based on 23x FY24E P/E (from 20x), which is still not demanding, given a 29% sales/ 31% adj. net profit CAGR during FY23-26E.</li><li>2Q24E outlook is still conservative. Management is still highly cautious about the hotel demand, because of the macro uncertainty (post-holidays and weekend orders have been week vs last year) and they are still foreseeing a potential YoY drop in RevPAR in 2Q24E. O</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

The hotel sector has been under pressure in 2Q24 QTD (post-holidays leisure demand is weak and business recovery is slow), and therefore, the outlook is still conservative.However, Atour’s retail business has performed well to more than offset this drag. Hence with a healthy retail sales growth target upgrade, we maintain BUY and raise TP to US$27.72, based on 23x FY24E P/E (from 20x), which is still not demanding, given a 29% sales/ 31% adj. net profit CAGR during FY23-26E.2Q24E outlook is still conservative. Management is still highly cautious about the hotel demand, because of the macro uncertainty (post-holidays and weekend orders have been week vs last year) and they are still foreseeing a potential YoY drop in RevPAR in 2Q24E. OContent is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Atour Lifestyle (ATAT US) - Guidance Raised, Backed by Robust Retail Sales

<ul><li>4Q23 results were a slight beat but the FY24E guidance is slightly disappointed.</li><li>However, we are not that pessimistic because: 1) sequential improvement is likely (high base in 1H), 2) OCC rate is still the best among its peers implying further market share gains, and 3) PMI has started to improve in Mar 2024.</li><li>And a 16x FY24E P/E is not demanding at all given a 26%/ 41% 3-year sales/ net profit att. CAGR.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

4Q23 results were a slight beat but the FY24E guidance is slightly disappointed.However, we are not that pessimistic because: 1) sequential improvement is likely (high base in 1H), 2) OCC rate is still the best among its peers implying further market share gains, and 3) PMI has started to improve in Mar 2024.And a 16x FY24E P/E is not demanding at all given a 26%/ 41% 3-year sales/ net profit att. CAGR.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Atour Lifestyle (ATAT US) - Prudent Guidance but QoQ Recovery Is Likely

China

Xinhu Zhongbao Co., Ltd. provides development and sale of residential properties.  The Company operates in import and export trading, hotel management, and construction materials manufacturing.

Chengdu Hi-tech Development Co., Ltd. develops and sells real estate properties.  The Company also designs and produces kitchen cabinets, produces pharmaceuticals, and develops taxation software.

Chengdu Hi Tech Development Co Ltd. (000628 CH)

Greentown China Holdings Ltd. develops real estate.  The Company builds residential villas, low-rise apartment buildings, and high-rise apartment buildings for middle and high-income people.

Shanghai Chinafortune Co Ltd manufactures and markets electrical products and instruments, including electric meters, printed circuit boards, and electric motors. The Company, through its subsidiaries, also operates in network engineering, taxi services, import/export trading, and property management.

Shanghai Lujiazui Finance & Trade Zone Development Co., Ltd. operates in land development, property management, and infrastructure facilities construction within the Lujiazui Finance and Trade Zone.  The Company also undertakes building and renovation projects.

Shanghai Lujiazui Finance & Trade Zone (600663 CH)

Gemdale Corporation develops residential buildings and operates in property rental and management. The Company also invests in commercial trading businesses.

China Overseas Property Holdings Limited operates as a property management firm. The Company manages residential communities, commercial properties and government properties in Hong Kong and Macau.

Country Garden Services Holdings Company Limited provides real estate development services. The Company develops residential apartments, multi-functional complex buildings, government and public facilities, industrial parks, highway service stations, and schools. Country Garden Services Holdings serves clients in China.

Poly Property Services Co., Ltd. provides property services. The Company offers property management, property projects pre-consultation, post-delivery evaluation and analysis, professional equipment and facilities maintenance, housekeeping, and other services. Poly Property Services provides services in China.

Hainan Haide Industry Co., Ltd. develops residential properties and operates a hotel.

Asset World Corp Public Company Limited focuses on real estate development and investment services. The Company offers property management. Asset World Corp serves customers in Thailand.

WHA Corp PCL is a built-to-suit distribution center and factory developer in Thailand.

Land and Houses Public Company Limited develops real estate projects including single-detached homes, townhouses, and condominiums. The Company builds single and attached homes, primarily on land that it develops and improves. Land and Houses also operates its own architectural, engineering, design and construction teams for customer's specific designs and orders.

Japan Prime Realty Investment Corporation is a real estate investment trust (REIT) which mainly invests in office buildings and commercial-use facilities nationwide.

Retail Opportunity Investments Corp. is a fully integrated and self-managed real estate investment trust ("REIT").  The Company specializes in the acquisition, ownership and management of necessity-based community, and neighborhood shopping centers in the western and eastern regions of the United States anchored by national and regional supermarkets and drugstores.

Retail Opportunity Investments Corp. (ROIC US)

Industrial & Infrastructure Fund Investment Corporation is a a real estate investment trust (REIT). The Company invests in real estate properties such as facilities for industry and infrastructure institution.

Industrial & Infrastructure Fund Investment (3249 JP)

Industrial & Infrastructure Fund Investment

Nippon Accommodations Fund Inc. is a real estate investment trust (REIT), which invests in income producing properties.  The Company invests in residential buildings.

SPH REIT is a Singapore-based REIT established principally to invest, directly or indirectly, in a portfolio of income-producing real estate which is used primarily for retail purposes in Asia-Pacific, as well as real estate-related assets.

Equity Commonwealth is a real estate investment trust, or REIT. The Company primarily owns office buildings located in Central Business District and suburban areas of major metropolitan markets in the United States, and has a large concentration of properties leased to the U.S. Government and medical related tenants. Equity CommonWealth also owns industrial lands in Hawaii.

Getty Realty Corporation owns and leases properties in the Northeastern and Middle Atlantic states. These properties, consisting of service stations, convenience stores and petroleum marketing terminals are leased to Getty Petroleum Marketing Inc. Getty Realty Holding is also a marketer of heating oil in Pennsylvania and Maryland.

Atour Lifestyle Holdings Limited operates as a holding company. The Company, through its subsidiaries, owns and manages midscale hotel chain through offline and online channels, including mobile application and weixin-wechat mini program. Atour Lifestyle Holdings serves customers in China.

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Atour Lifestyle Holdings (ATAT US)

[Atour Lifestyle (ATAT US, BUY, TP US$36) Target Price Change]: 618-Commerce Sales Set a New Record

Atour sees strong sales growth during 618 promotions, with retail driving positive revenue and maintaining positive RevPAR growth. Analysts raise...

Blue Lotus Research Institute

Atour Lifestyle Holdings Placement - Well Flagged Deal, past Selldowns Have Done Well

Legend Capital (LC), one of the principal shareholders of Atour Lifestyle Holdings (ATAT US), is looking to raise around US$168m through a...

Sumeet Singh

[Atour Lifestyle (ATAT US, BUY, TP US$39) TP Change]: Should Retail Profit Be Accorded a Multiple?

Atour's Q1 revenue and non-GAAP NI beat estimates, driven by hotel expansion and new retail products. Raised 2024 revenue guidance to 40% YoY due...

Blue Lotus Research Institute

Atour Lifestyle (ATAT US) - Guidance Raised, Backed by Robust Retail Sales

The hotel sector has been under pressure in 2Q24 QTD (post-holidays leisure demand is weak and business recovery is slow), and therefore, the...

CMB International

Atour Lifestyle (ATAT US) - Prudent Guidance but QoQ Recovery Is Likely

Management mentioned that the RevPAR recovery so far in 2024 has been lower vs last year (CMBI est. 114%), however, this was actually an...

CMB International

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

[Atour Lifestyle (ATAT US, BUY, TP US$36) Target Price Change]: 618-Commerce Sales Set a New Record

​Atour sees strong sales growth during 618 promotions, with retail driving positive revenue and maintaining positive RevPAR growth. Analysts raise...

Blue Lotus Research Institute

Atour Lifestyle Holdings Placement - Well Flagged Deal, past Selldowns Have Done Well

Legend Capital (LC), one of the principal shareholders of Atour Lifestyle Holdings (ATAT US), is looking to raise around US$168m through a...

Sumeet Singh

[Atour Lifestyle (ATAT US, BUY, TP US$39) TP Change]: Should Retail Profit Be Accorded a Multiple?

​Atour's Q1 revenue and non-GAAP NI beat estimates, driven by hotel expansion and new retail products. Raised 2024 revenue guidance to 40% YoY due...

Blue Lotus Research Institute

Atour Lifestyle (ATAT US) - Guidance Raised, Backed by Robust Retail Sales

The hotel sector has been under pressure in 2Q24 QTD (post-holidays leisure demand is weak and business recovery is slow), and therefore, the...

CMB International

Atour Lifestyle (ATAT US) - Prudent Guidance but QoQ Recovery Is Likely

Management mentioned that the RevPAR recovery so far in 2024 has been lower vs last year (CMBI est. 114%), however, this was actually an...

CMB International

Atour sees strong sales growth during 618 promotions, with retail driving positive revenue and maintaining positive RevPAR growth. Analysts raise...

Atour's Q1 revenue and non-GAAP NI beat estimates, driven by hotel expansion and new retail products. Raised 2024 revenue guidance to 40% YoY due...