SHIJI INFORMATION TECHNOLOGY(002153)：DOWNSTREAM HOTEL AND TOURISM INDUSTRY RECOVERING;FUNDAMENTALS TO TURN AROUND

What's new
Recently, the hotel and tourism industry recovered as COVID-19 containment measures slightly eased in China and travel restrictions loosened in many countries. We expect Shiji Information Technology (Shiji) to acquire new customers and to reap the fruits of its global expansion strategy as the downstream industry recovers. In our opinion, the company’s fundamentals will likely turn around.
Comments
Domestic COVID-19 containment policies changed. On June 28, Chinese government launched the ninth edition of its COVID-19 containment measures[1]. Overseas travelers and close contacts of confirmed COVID-19 cases will only need to quarantine at a centralized facility for 7 days. They also need to spend 3 additional days at home before they can venture out. Recently, many cities have shortened the quarantine period and reduced regular nucleic acid tests. We expect the downstream market of hotel, tourism, and retail IT system providers to recover.
Overseas high-end hotels’ business recovering. In 1Q21, performance of overseas high-end hotels, including Marriott, had recovered. In 1Q22, Marriott’s revenue per available room (RevPAR) increased 96.5% YoY and recovered to 81.0% of the 1Q19 level. The hotel brand’s business recovery in the US and Canada is rapid. In 1Q22, its revenue in the two countries recovered to 86.7% of the 1Q19 level. RevPAR in other regions recovered to 66.9% of the 1Q19 level. In March 2022, the overseas hotel industry further recovered. Marriott’s RevPAR reached 90.6% of the level in the same period of 2019, with occupancy rate reaching 63.6% and average daily rate (ADR) 5% above March of 2019.
Shiji’s customer expansion and global expansion to benefit from downstream market recovery. 1) The company has signed contracts with InterContinental and Peninsula. However, the installation of cloud PMS in these two hotels was influenced by the COVID-19 resurgence in 2022. As China’s COVID-19 containment measures have slightly eased, we expect Shiji to install its cloud PMS for InterContinental and Peninsula hotels, replace old systems of some domestic hotels with its cloud PMS, and acquire new customers. 2) International high-end hotels such as Peninsula and InterContinental have strict requirements for management systems. This proves the competitiveness of Shiji's products and Shiji’s global expansion capability. We expect the company to enter the supply chain of more potential customers on the back of its brand influence and product quality. The company's customer expansion and online and global business expansion will likely benefit from the accelerating recovery of the downstream market, in our view. We believe that it will reap the fruits of its global expansion strategy and its fundamentals will turn around.
Financials and valuation
We keep our 2022 and 2023 earnings forecasts unchanged. We are upbeat on the company’s global expansion and platform building. We maintain OUTPERFORM and our SOTP-based ex-rights TP of Rmb18, implying 17.1% upside.
Risks
Worse-than-expected impact from COVID-19; slower-than-expected global business expansion.
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   【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。