HSBC Research upgraded H World’s investment rating to "Buy" with a target price raised to 36.2 yuan

HSBC Global Research has upgraded its investment rating for H World (01179.HK)(HTHT.US) from "Hold" to "Buy," raising the target price for H shares from HKD 27.8 to HKD 36.2.

The bank stated that it previously assigned a "Hold" rating based on the belief that the oversupply situation in China's hotel industry would continue to suppress average room revenue (RevPAR), and the company had also lowered its related guidance for the first two quarters of this year. However, the bank has observed a recovery trend in average room revenue since June this year, with the decline in occupancy rates during the off-season narrowing under more balanced supply and demand, and strong growth in average room rates during the peak season. The bank expects the trend of improving average room revenue to continue, driven by tighter hotel supply growth.

In light of better average room revenue forecasts, the bank has raised its revenue growth forecast for H World in the third quarter from 4% to 6% (guidance is 2% to 6%); it has also raised the fourth quarter revenue growth forecast to 6%, up from the original expectation of 4%; it anticipates a compound annual growth rate of net profit of 10.6% from 2025 to 2027, up from the original expectation of 9%, and has increased the forecast for the compound annual growth rate of revenue from 7.2% to 7.4%