Key Takeaways:
H World Group Limited (NASDAQ: HTHT) reported an 11% year-over-year sales increase in the first quarter, with adjusted EBITDA climbing 24% to RMB1.86 billion, 9% above CLSA’s forecast.
"The company benefited from strong leisure travel demand," CLSA said in a research note, while pointing to higher average daily rates as a key driver for the profit beat.
Despite the headline growth, underlying metrics revealed weakness. Same-store revenue per available room (RevPar) declined 2.3% year-over-year, as newly opened hotels did not generate high enough rates to offset occupancy pressure. The company added 360 hotels in the first quarter, part of a full-year plan to open between 1,500 and 1,700 net new hotels.
In response, CLSA trimmed its adjusted EBITDA forecasts for 2026-2028 by 1% and lowered its US target price on the stock to $56 from $57. H World Group stock opened at $46.05 on Friday, against a consensus target price of $54.80 from data compiled by MarketBeat.com.
To combat the occupancy pressure and stabilize growth, H World plans to accelerate the opening of upper midscale and upscale hotels in higher-tier cities. However, CLSA noted this would entail "slightly higher hotel operating costs to support new brands."
The slight target price reduction from CLSA stands in contrast to more bullish calls from other firms in recent months. In March, Benchmark raised its target price to $60, while UBS Group initiated a "buy" rating with a $62.40 price objective. Overall, the stock holds an average "Buy" rating among analysts.
Institutional investors have also been active, with AustralianSuper Pty Ltd purchasing 136,830 shares in the fourth quarter. However, this is balanced by a significant insider sale in March, when Director Theng Fong Hee sold 31,640 shares for a total of $1.61 million.
The mixed signals suggest investors are weighing strong top-line growth against concerns over operational efficiency and insider conviction. The company's ability to successfully integrate its new upscale brands without further eroding margins will be the key focus for the remainder of the year.
This article is for informational purposes only and does not constitute investment advice.
