On Thursday, Citi updated its stance on Atour Lifestyle Holdings (NASDAQ: ATAT), increasing its price target to $29.50 from $29.30 while maintaining a Buy rating. Citi's analyst noted that Atour presented impressive second-quarter results for 2024, with non-GAAP net profit climbing 32% year-over-year to Rmb328 million.
This performance was primarily fueled by a 64% surge in revenue to Rmb1.8 billion, exceeding expectations due to a successful retail business launch and an expanding hotel supply chain business. The latter benefited from network growth and more centralized purchasing by franchisees, which helped counterbalance any softness in Revenue per Available Room (RevPAR).
Atour's management has responded to the company's robust performance by revising its full-year sales growth forecast to 48-52% year-over-year, up from the previously projected 40%. This adjustment comes alongside an anticipation for retail revenue to double compared to the prior year, a significant increase from the previously expected high double-digit growth. Additionally, the company plans to open approximately 400 new locations, an uptick from the 360+ initially targeted.
In a move that underscores Atour's financial health and commitment to shareholder returns, the company has introduced a three-year annual dividend policy. This policy guarantees a minimum payout of 50% of the previous financial year's profits. In line with this new policy, Atour has declared a cash dividend of $62 million.
Following these developments, Citi has fine-tuned its forecasts for Atour and slightly raised the price target. Furthermore, Citi is scheduled to host a group investor call with Atour on August 30, for which interested parties are required to register.
In other recent news, Atour Lifestyle Holdings Ltd announced its Q2 2024 financial results along with the introduction of a new dividend policy spanning the next three years. This strategic move is seen as a reflection of the company's financial stability and future cash flow expectations. Specifics of the dividend policy are yet to be communicated to shareholders.
Atour Lifestyle also reported considerable growth in its Q1 2024 earnings, with a year-over-year increase of 89.7% in net revenues. This growth has been attributed to the expansion of its hotel network and a surge in its retail business. Additionally, the company has announced significant changes to its board and management, with Mr. Jianfeng Wu, former Co-Chief Financial Officer, being appointed to the board.
The company is preparing for a secondary offering of 10 million American depositary shares (ADSs) by entities affiliated with Legend Capital, which will reduce Legend Capital's stake in Atour to approximately 7.6%. Atour will not receive any proceeds from this sale.
Morgan Stanley (NYSE:MS) has adjusted its financial outlook on Atour Lifestyle, reducing the price target to $31 from $32, while maintaining an Overweight rating. The firm revised its revenue forecasts for fiscal years 2024 through 2026, increasing them by 5%, 4%, and 4%, respectively. These are some of the recent developments in Atour Lifestyle.
InvestingPro Insights
Atour Lifestyle Holdings' (NASDAQ: ATAT) recent performance has captured the attention of investors and analysts alike, and real-time data from InvestingPro further illuminates the company's financial standing. With a solid market capitalization of $2.27 billion, Atour trades at a Price/Earnings (P/E) ratio of about 17, closely aligned with the last twelve months as of Q1 2024. This valuation reflects the company's robust revenue growth, which has soared by over 107% in the same period, showcasing the effectiveness of its business expansion and retail strategy.
InvestingPro Tips highlight that Atour holds more cash than debt, indicating a strong balance sheet and financial flexibility. Additionally, the company is recognized as a prominent player in the Hotels, Restaurants & Leisure industry, with cash flows that can sufficiently cover interest payments. Notably, Atour's liquid assets exceed its short-term obligations, which is a reassuring sign of the company's liquidity and ability to meet immediate financial commitments. For investors seeking further insights, there are additional InvestingPro Tips available, which can be explored for a deeper analysis of Atour's financial health and market position.
It's also worth mentioning that Atour is trading near its 52-week high, at approximately 93% of this peak value, indicating investor confidence. However, it is trading at a high Price/Book multiple of 6.91, which could suggest that the stock is valued more for its market potential than its current assets. For a more comprehensive understanding, interested parties can find more InvestingPro Tips at InvestingPro.
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