We came across a bullish thesis on Atour Lifestyle Holdings Limited (ATAT) on Substack by MileHighMonk. In this article, we will summarize the bulls’ thesis on ATAT. Atour Lifestyle Holdings Limited (ATAT)’s share was trading at $25.92 as of Nov 25th. ATAT’s trailing and forward P/E were 22.35 and 22.73 respectively according to Yahoo Finance.
A hotel suite, highlighting the premium-branded select-service hotels offering of the REIT.
Atour (ATAT) presents a compelling growth story in the hotel and retail sectors, underpinned by exceptional financial performance and strategic initiatives. The company has achieved a 31% revenue CAGR, double the growth rate of market leader H World, and a 60% EBITDA CAGR, reflecting its ability to scale profitability. Atour’s RevPAR (revenue per available room) performance is unmatched in the industry, even as it expands its hotel portfolio at twice the pace of H World, demonstrating its operational efficiency despite the ramp-up period typically associated with new properties.
Atour’s retail business is a standout success, focusing on sleep-related products that cater to a growing lifestyle market. With 90% of its offerings targeting better sleep and pillows alone accounting for 60% of sales, the segment is forecasted to generate $372 million in revenue for FY24, marking a 135% year-over-year increase. The “Planet Pillow,” holding a 10% market share in China, exemplifies Atour’s dominance in this niche. Despite the rapid growth, the retail business is undervalued, trading at multiples below its potential when compared to global peers, making it an attractive component of the company’s overall valuation.
Atour’s hotel business adds further weight to its investment case. With a 30% revenue CAGR and 60% EBITDA CAGR over four years, its financial trajectory outpaces competitors, justifying a valuation premium even amid the “China discount.” Peers trade at P/E multiples of 17x–33x, and Atour’s superior performance suggests significant upside.
A recent capital allocation shift underscores management’s commitment to shareholder returns. The announcement of a $0.45 annual dividend per ADS, equating to a 1.6% yield, reflects Atour’s asset-light model and robust cash flow generation. Combined with its growth profile, the dividend policy enhances Atour’s investment appeal, positioning it as an undervalued growth leader in the hospitality and retail sectors.
Atour Lifestyle Holdings Limited (ATAT) is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 15 hedge fund portfolios held ATAT at the end of the third quarter which was 15 in the previous quarter. While we acknowledge the risk and potential of ATAT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ATAT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.