China/Asia TMT

Shawn Yang

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 reported its 4Q22 revenue/non-GAAP operating profit/non-GAAP net income 8.0%/78.3%/114.6% higher than our estimate. </li>
<li>We adjust Atour’s hotel expansion estimate from 2.4k to 1.9k until 2025 due to its low appetite in expanding midscale segment.</li>
<li>We raise our 2023 earnings estimate due to better operating efficiency, but trimmed its hotel network expanding pace in 2023-2025, leading to TP cut by US$2.5 to US$34.</li>
</ul>


Atour reported its 4Q22 revenue/non-GAAP operating profit/non-GAAP net income 8.0%/78.3%/114.6% higher than our estimate. 
We adjust Atour’s hotel expansion estimate from 2.4k to 1.9k until 2025 due to its low appetite in expanding midscale segment.
We raise our 2023 earnings estimate due to better operating efficiency, but trimmed its hotel network expanding pace in 2023-2025, leading to TP cut by US$2.5 to US$34.


[Atour Lifestyle (ATAT US, BUY, TP US$34) Target Price Change]: A Steady Expanding Year in 2023

Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

<ul>
<li>Chinese outbound and domestic air traffic activity improved sharply Y/Y in the January-February LNY travel period, but activity remains far below pre-Covid levels</li>
<li>Given constrained outbound air capacity, we're surprised to see relatively low (65-66%) passenger load factors reported by the leading Chinese airlines during LNY</li>
<li>If planes don't begin to fill up with Chinese tourists soon, we believe some investors may become disappointed in the pace of China's travel recovery </li>
</ul>


Chinese outbound and domestic air traffic activity improved sharply Y/Y in the January-February LNY travel period, but activity remains far below pre-Covid levels
Given constrained outbound air capacity, we're surprised to see relatively low (65-66%) passenger load factors reported by the leading Chinese airlines during LNY
If planes don't begin to fill up with Chinese tourists soon, we believe some investors may become disappointed in the pace of China's travel recovery 


TRACKING TRAFFIC/Chinese Tourism: LNY Traffic Points to Slow Recovery in 2023

<ul>
<li>The strong travel demand in Jan. and Feb. had pushed up the industry-wide ADR nearing the 2019 level due the temporary hotel shortage, Atour especially benefited from the trend . </li>
<li>Except the positive industry trend, we think the releasing of requisitioned hotels and the expansion of Atour Light are the near-term catalyst for Atour. </li>
<li>We maintain the BUY rating and raise TP by US$1.5 to US$36.5</li>
</ul>


The strong travel demand in Jan. and Feb. had pushed up the industry-wide ADR nearing the 2019 level due the temporary hotel shortage, Atour especially benefited from the trend . 
Except the positive industry trend, we think the releasing of requisitioned hotels and the expansion of Atour Light are the near-term catalyst for Atour. 
We maintain the BUY rating and raise TP by US$1.5 to US$36.5


[Atour Lifestyle (ATAT US) Target Price Change]: Strong Recovery Bodes Well for 1Q23

<ul>
<li>Although the operating metrics are expected to be weak in 4Q22 due to the lingering of Covid effects, we expect the resumption of travel to stimulate hotel demands in 2023. </li>
<li>We expect Atour to report its 4Q22 revenue at RMB580mn and OPM at 8.2%, both in-line with consensus. We expect a strong revenue growth at 60% YoY in 2023.</li>
<li>We rate the stock as BUY and maintain the TP at US$35.</li>
</ul>


Although the operating metrics are expected to be weak in 4Q22 due to the lingering of Covid effects, we expect the resumption of travel to stimulate hotel demands in 2023. 
We expect Atour to report its 4Q22 revenue at RMB580mn and OPM at 8.2%, both in-line with consensus. We expect a strong revenue growth at 60% YoY in 2023.
We rate the stock as BUY and maintain the TP at US$35.


Atour (ATAT.US) Preview: Expecting Weak 4Q22 and Strong 2023

<ul>
<li>We believe Atour’s near-term goal is to build a national hospitality group. We expect Atour’s network to expand to 2,500+ in 2025 from the current 900+.</li>
<li>The time window for chain hotel’s expansion is still open in China. Mobile-Internet-enabled business model changes will usher in new challengers like Atour to the industry’s Big Three.</li>
<li>We initiate Atour (ATAT US) with a BUY rating and target price of US$35 per ADS to ride on its first phase of network expansion.</li>
</ul>


We believe Atour’s near-term goal is to build a national hospitality group. We expect Atour’s network to expand to 2,500+ in 2025 from the current 900+.
The time window for chain hotel’s expansion is still open in China. Mobile-Internet-enabled business model changes will usher in new challengers like Atour to the industry’s Big Three.
We initiate Atour (ATAT US) with a BUY rating and target price of US$35 per ADS to ride on its first phase of network expansion.


Atour(ATAT.US) Initiation: Buy for First-Stage Single-Brand Network Expansion

China

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$34) Target Price Change]: A Steady Expanding Year in 2023

We maintain the BUY rating, we raise our 2023 earnings estimate due to better operating efficiency, but trimmed its hotel network expanding pace in...

Blue Lotus Research Institute

TRACKING TRAFFIC/Chinese Tourism: LNY Traffic Points to Slow Recovery in 2023

Jan-Feb air traffic shows the beginnings of a recovery in Chinese travel activity, but we're surprised to see outbound flights with load factors of...

Tracking Traffic

[Atour Lifestyle (ATAT US) Target Price Change]: Strong Recovery Bodes Well for 1Q23

The strong travel demand in Jan. and Feb. had pushed up the industry-wide ADR nearing the 2019 level due the temporary hotel shortage, Atour...

Blue Lotus Research Institute

Atour (ATAT.US) Preview: Expecting Weak 4Q22 and Strong 2023

Although the operating metrics are expected to be weak in 4Q22 due to the lingering of Covid effects, we expect the resumption of travel to...

Blue Lotus Research Institute

Atour(ATAT.US) Initiation: Buy for First-Stage Single-Brand Network Expansion

We expect Atour’s network to expand to 2,500+ in 2025 from the current 900+. We initiate Atour (ATAT US) with a BUY rating and target price of...

Blue Lotus Research Institute

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