Positive Outlook for H World Group: Strategic Shift to Asset-Light Model Enhances Profitability and Raises Price Target

Analyst Dan Chee of Morgan Stanley maintained a Buy rating on H World Group (HTHT – Research Report), with a price target of $47.00.

Dan Chee has given his Buy rating due to a combination of factors that reflect a positive outlook for H World Group. The company has transitioned 11 hotels from an asset-heavy to an asset-light model, which, despite reducing revenue forecasts for FY25 and FY26, has improved EBITDA margins significantly. This strategic shift is expected to enhance profitability, making the stock more attractive.
Additionally, the updated forecasts incorporate a withholding tax as per company guidance, affecting EPS slightly but not detrimentally. The valuation model has been adjusted to reflect FY25 as the base year, with a slight reduction in the medium-term growth rate. Despite these adjustments, the price target has been raised to $47, indicating confidence in the company’s growth potential. The risk-reward profile remains favorable, supporting the Buy recommendation.

In another report released on March 21, Bank of America Securities also reiterated a Buy rating on the stock with a $47.00 price target.