Founder, Riedel Research

David Riedel

Founder

Independent equity research on GEM Markets

Riedel Research

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Equity Bottom-Up

<ul><li>The stock price has risen 17% since our BUY rating in March 2016. However, based on the strong operating metrics in recent reports we believe there is still an upside of 22%.</li><li>In April, an attempted kidnapping damaged the reputation of Home Inn (a major competitor).</li><li>The occupancy rate at manachised hotels (hotels that are franchised but then managed by the company) stopped declining for the first time in three years and a half.</li><li>We believe gross margin will improve, as newly opened higher-end hotels raise the general daily rates.<br>Manachised hotel number still expanded rapidly, increasing 54% YOY in 1Q16.</li><li>The Company has 607 manachised hotels in the pipeline.</li><li>We assume revenues will grow at least 14% in 2016 and the operating margin will improve to 13% in 2016 versus 10% in 2015.</li><li>Historical valuation suggests a target price of USD46 and an upside of 22%. BUY.</li></ul>

The stock price has risen 17% since our BUY rating in March 2016. However, based on the strong operating metrics in recent reports we believe there is still an upside of 22%.In April, an attempted kidnapping damaged the reputation of Home Inn (a major competitor).The occupancy rate at manachised hotels (hotels that are franchised but then managed by the company) stopped declining for the first time in three years and a half.We believe gross margin will improve, as newly opened higher-end hotels raise the general daily rates. Manachised hotel number still expanded rapidly, increasing 54% YOY in 1Q16.The Company has 607 manachised hotels in the pipeline.We assume revenues will grow at least 14% in 2016 and the operating margin will improve to 13% in 2016 versus 10% in 2015.Historical valuation suggests a target price of USD46 and an upside of 22%. BUY.

HTHT - Continued Strength and Widening Margins to Drive Shares in China Travel Play Higher - BUY

Huazhu Group

HTHT - Continued Strength and Widening Margins to Drive Shares in China Travel Play Higher - BUY