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EQUITY RESEARCH

Company Report

Hong Kong

Hotels, Resorts & Cruise Lines

Fosun Tourism Group BUY

January 17, 2023

Core resorts rebound with promising profitability
Price: HKD 11.92 > Core resorts became popular during New Year’s vacation. Driven by rising demand for
Bloomberg: short- distance tours around Beijing and Shanghai, Club Med Anji Resort and Beidaihe
[1992 HK] Gold Coast Resort posted nearly full occupancy during the New Year’s Day holidays of
2023. Atlantis Sanya was the preferred vacation mecca for many tourists, with the
Market Cap: turnover already exceeding that of the same period of 2022 and 2019.
USD 1,842.29 m
> It received a total of 37,000 tourists and recorded an average occupancy rate of
Outstanding Shares: 97.4%, with an average daily room price of Rmb2,736, of which the growth rate of non-
1,241.50 m room revenue from catering, water world, aquarium, etc. exceeded the room revenue.
Lijiang Foliday Town revenue increased by 27% YoY during the New Year’s Day
Six Month Avg.
holidays, with an average daily room rate of Rmb1,027.
Daily Trading vol.
(USD m): 2.01
> High certainty of profitability improvement for Atlantis Sanya. The Atlantis resort hosts
52 week High/Low: 1,314 rooms with full ocean view, one of the largest natural seawater aquariums in
HKD 14.68 / HKD 6.11 China, a 200,000sqm water world, high-quality food and beverage services, and more
than 5,000sqm of shopping centres. We thus see strong price elasticity after the
epidemic. Atlantis recorded an adjusted EBITDA margin of 49.5% in 2020 and 49.2%
in 1H21.

> Its tourist number declined to 1.5m, posting revenue of Rmb487m (-41.7% YoY) and
adjusted EBITDA of Rmb0.207bn (- 49.7% YoY) in 1H22 due to the pandemic
resurgence in many provinces. We expect the negative impact of the pandemic to
diminish with the peaking of Covid cases in most cities. We thus see high visibility in
profitability improvement given the high-quality assets of Atlantis’ hotel and water
world.

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Bringing China to the World

Leisure
Company Research Core resorts rebound with promising profitability
11 January 2023

BUY Fosun Tourism Group (1992:HK)

Maintain
Market Data: 10 January 2023 Core resorts became popular during New Year’s vacation. Driven by rising demand for short-
Closing price (HK$) 11.92 distance tours around Beijing and Shanghai, Club Med Anji Resort and Beidaihe Gold Coast
HSCEI 7263.63 Resort posted nearly full occupancy during the New Year’s Day holidays of 2023. Atlantis Sanya
52-week high/Low (HKD) 14.68/6.11 was the preferred vacation mecca for many tourists, with the turnover already exceeding that
Market Cap (HK$bn) 14.8 of the same period of 2022 and 2019. It received a total of 37,000 tourists and recorded an
Shares outstanding (m) 1241 average occupancy rate of 97.4%, with an average daily room price of Rmb2,736, of which the
Exchange Rate (Rmb-HKD) 1.15
growth rate of non-room revenue from catering, water world, aquarium, etc. exceeded the
Price Performance Chart:
room revenue. Lijiang Foliday Town revenue increased by 27% YoY during the New Year’s Day
holidays, with an average daily room rate of Rmb1,027.
High certainty of profitability improvement for Atlantis Sanya. The Atlantis resort hosts 1,314
rooms with full ocean view, one of the largest natural seawater aquariums in China, a
200,000sqm water world, high-quality food and beverage services, and more than 5,000sqm
of shopping centres. We thus see strong price elasticity after the epidemic. Atlantis recorded
an adjusted EBITDA margin of 49.5% in 2020 and 49.2% in 1H21. Its tourist number declined
to 1.5m, posting revenue of Rmb487m (-41.7% YoY) and adjusted EBITDA of Rmb0.207bn (-
Source: Bloomberg 49.7% YoY) in 1H22 due to the pandemic resurgence in many provinces. We expect the
negative impact of the pandemic to diminish with the peaking of Covid cases in most cities.
Contact We thus see high visibility in profitability improvement given the high-quality assets of Atlantis’
Zhao Lingyi hotel and water world.
A0230518100003
Continued recovery of Club Med and overseas resorts. In 1H22, Club Med achieved a turnover
zhaoly2@swsresearch.com
of Rmb5.74bn (+336% YoY) and recovered to 90.2% of the 1H19 level. The performance of
various regions diverged, with the turnover in the Americas up 22.2% YoY while that in Europe,
Africa and the Middle East regions down 14.1% YoY. In the Asia-Pacific region, most countries
Yang Guang closed their borders until early June, so the turnover dropped 73.3% YoY in 1H19. With the
A0230122100004 resumption of cross-border travel, the tourist volume in popular international tourist
yangguang@swsresearch.com
destinations has rebounded. We thus expect overseas resorts to recover steadily. Club Med’s
projects in China will see greater flexibility in 2023 given a low base. On the back of the mature
business model of Joyview, the company accelerated expansion around major cities, and is
exploring a three-gradient quality vacation product system for long-distance, suburban and
intra-city tours.
Maintain BUY. Given the severe Covid-19 situation in 4Q22, the overall tourism market
performance was lower than expected. We lower our net profit forecasts from -Rmb349m to -
Rmb634m in 22E, from Rmb530m to Rmb401m in 23E, and from Rmb824m to Rmb757m in
24E. We expect adjusted EBITDA to reach Rmb2.26bn in 22E, Rmb3.46bn in 23E and
Rmb3.93bn in 24E. We derive our target price of HK$17.50 based on 11x 23E EV/EBITDA, and
given c.47% upside, we maintain our BUY rating.
Risks. Weaker-than-expected demand recovery; lower-than-expected new projects sales.
Financial summary and valuation
2020 2021 2022E 2023E 2024E
Revenue (Rmbm) 7060 9261 13430 18596 21045
Growth (YoY %) -59% 31% 45% 38% 13%
Adjusted Net profit (Rmbm) -2574 -2712 -634 401 757
Growth (YoY %) - - - - 89%
Adjusted EPS (Rmb) -2.07 -2.18 -0.51 0.32 0.61
ROE (%) -47.4% -90.6% -26.9% 14.5% 21.5%
PE (x) -20 32 17
Note: Net income is calculated as Non-GAAP net profit; EPS is calculated as Non-GAAP diluted earnings per ADS.
 October12,2015
January 12, 2010 Building Materials
Food, Beverage| &
Company
Tobacco |Research
Company Company
Research
Research

Information Disclosure：
Analyst and his/her associate do not have any financial interests in the securities or investment products recommended in the report.

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