GreenTree Hospitality Group (GHG) Q1 2024 earnings summary

Executive summary

• Q1 2024 total revenues were CNY/RMB 352.2 million, down 7.1% year-over-year, with hotel revenues up 8.8% and restaurant revenues down 38.9% due to strategic repositioning and closures.

• Net income rose 76% to CNY/RMB 57.3 million, with a margin of 16.3%, and adjusted EBITDA increased 17.2% to CNY/RMB 109.4 million, margin 31.1%.

• Strategic focus included expanding mid-to-upscale hotel segments and deeper penetration in tier 3 and lower cities, especially in South China.

• Restaurant business repositioned for profitability, closing underperforming stores and focusing on franchise and street store expansion.

• Operated 4,256 hotels and 185 restaurants as of March 31, 2024, with a pipeline of 994 hotels contracted or under development.

Financial highlights

• Hotel revenue was CNY/RMB 274.8 million (up 8.8%), restaurant revenue CNY/RMB 77.7 million (down 38.9%), and total revenues CNY/RMB 352.2 million (down 7.1%).

• Net income per ADS increased to CNY/RMB 0.58, with core net income per ADS up 22.3% to CNY/RMB 0.49.

• Adjusted EBITDA margin for hotels rose to 37.3%, and net income margin for hotels at 25.6%.

• Cash and equivalents, including restricted cash and short-term investments, totaled CNY/RMB 1,517.3 million as of March 31, 2024.

• Gross profit increased 5.9% year-over-year to CNY/RMB 144.1 million, with gross margin improving to 40.9%.

Outlook and guidance

• Hotel business revenue guidance maintained at 7%-12% year-over-year growth for 2024.

• Restaurant business guidance withdrawn due to revenue unpredictability amid strategic repositioning.

• RevPAR expected to trend down at a similar rate in Q2 as in Q1, mainly due to ongoing hotel upgrades.

• Plan to open 480 new hotels in 2024, mostly franchised and managed, with 62%-65% in Tier 3 and lower cities.

• Restaurant openings targeted at 45-50 for the year, aiming for about 230 total by year-end.