H World Group 1Q26 results met expectations, Goldman Sachs maintains Buy rating

Overview

This is Goldman Sachs' 1Q26 earnings review of H World Group. The core view is that the company's quarterly results were in line with expectations, profitability improved, hotel additions and RevPAR growth are progressing as planned, and the company has started to emphasize expansion into the ASEAN market. The report maintains a Buy rating and believes the current valuation of about 11x FY26E EV/EBITDA and a 5.7% free cash flow yield is attractive.

Core views

Goldman Sachs' main views are positive: first, 1Q26 operating results were in line with expectations, and improved profitability should support market confidence; second, hotel additions and RevPAR growth remain on track, indicating that the pace of core hotel expansion is intact; third, the company continues to build the H Reward membership system, with member-booked room nights rising 11% year over year to 60 million, showing that membership traffic and the direct-sales system remain resilient; fourth, ASEAN expansion provides a new regional growth opportunity over the medium to long term; fifth, the main risks come from the macro backdrop, franchisee financing, recovery in consumer and travel demand, dilutive M&A, and Deutsche Hospitality operating performance.

Analysis framework

The report draws its judgment from 1Q26 results, earnings call highlights, operating metrics, valuation multiples, free cash flow yield, membership system metrics, and peer valuation comparisons. In addition to the company fundamentals, the report also cites Goldman Sachs' internal research frameworks, including GS Factor Profile, M&A Rank, and Quantum, to explain valuation, growth, financial returns, M&A probability, and comparable analysis methods.

Methodology notes

• Factor ProfileGS Factor Profile

  Compares a stock with the market and industry peers using growth, financial return, valuation multiples, and composite indicators.

  Goldman Sachs says this framework calculates percentile rankings using forward sales growth, EBITDA growth, EPS growth, ROE, ROCE, CROCI, P/E, P/B, EV/EBITDA, EV/FCF, and other metrics, then combines the growth, financial return, and valuation-adjusted results into an overall composite percentile.

• M&A probability assessmentM&A Rank

  Assesses the probability of a company becoming a takeover target on a scale of 1 to 3.

  Goldman Sachs discloses that in its M&A Rank, 1 represents a relatively high takeover probability, 2 represents a medium probability, and 3 represents a low probability; for companies ranked 1 or 2, the target price may incorporate M&A factors.

• Database and comparable analysisQuantum

  Goldman Sachs' proprietary database used for financial history, forecasts, and ratio analysis.

  Quantum can be used for deep analysis of a single company as well as for comparisons across industries and markets.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• H World Group ADR (HTHT.US)

  Core coverage name; Goldman Sachs maintains a Buy rating.

  Strengths

  1Q26 results were in line with expectations, profitability improved, hotel additions and RevPAR growth are progressing as planned, and the valuation is attractive.

  Weaknesses

  The stock has negative performance over the past 3 months and underperformed the NASDAQ Composite.

  Comparison

  Valuation is about 11x FY26E EV/EBITDA; the report says Atour at about 10x EV/EBITDA is lower.

  Risks

  Weaker macro conditions, RevPAR growth below expectations, weaker franchisee financing, slower recovery in consumer and travel demand, dilutive M&A, and Deutsche Hospitality cash drag.

• H World Group H-share (1179.HK)

  The H-share of the same company; the report references both HTHT/1179.HK.

  Strengths

  Shares the same improving fundamentals and expansion logic as the ADR.

  Weaknesses

  Affected by China hotel demand, franchise expansion, and overseas operating performance.

  Comparison

  Disclosed price is HK$35.48; together with the ADR, it forms the listed securities reference for H World Group.

  Risks

  Risks are consistent with H World's overall operating and macro risks.

• Atour Lifestyle Holdings (ATAT)

  A peer Buy-rated name mentioned in the report.

  Strengths

  Goldman Sachs says its valuation multiple is lower, at about 10x EV/EBITDA.

  Weaknesses

  This is not a dedicated Atour report, so it lacks more complete operating details.

  Comparison

  Compared with H World's about 11x FY26E EV/EBITDA, Atour trades at about 10x EV/EBITDA.

  Risks

  It may also be affected by fluctuations in China hotel and travel demand.

• NASDAQ Composite

  Benchmark for share price performance comparison.

  Strengths

  The chart shows the NASDAQ trending upward over the comparison period.

  Weaknesses

  It does not reflect hotel industry fundamentals and serves only as a market benchmark.

  Comparison

  HTHT underperformed the NASDAQ by 14.4%, 3.0%, and 2.3% over the 3-month, 6-month, and 12-month windows, respectively.

  Risks

  Changes in the market benchmark may affect the interpretation of relative performance.

Key data

• Report date2026-05-17From the document date and report metadata.
• RatingBuyThe report title and body both indicate a maintained Buy rating.
• Current priceADR $45.42; H-share HK$35.48From company-specific regulatory disclosure pricing information.
• Target priceabout $60Based on a visual reading of the target price history chart; the exact value has some reading uncertainty.
• Valuationabout 11x FY26E EV/EBITDAThe report says the current valuation is attractive.
• Free cash flow yield5.7%Used by the report as part of the valuation attractiveness case.
• Member-booked room nights60 million, +11% y/yHealthy growth in 1Q26 member-booked room nights.
• CRS contribution ratioBroadly stableThe report says the CRS contribution ratio remained broadly stable.
• Stock performance3 months -13.5%, 6 months +3.7%, 12 months +20.2%From the HTHT share price performance chart versus the NASDAQ Composite.
• Relative to NASDAQ3 months -14.4%, 6 months -3.0%, 12 months -2.3%HTHT underperformed the NASDAQ Composite across the 3-month, 6-month, and 12-month windows.
• Peer comparisonAtour about 10x EV/EBITDAGoldman Sachs also notes that Atour, which is Buy rated, trades at a lower valuation multiple.

Impact & implications

From an investment perspective, the report signals that H World's core operating trends are still progressing as planned, while improved profitability and membership system development should support the medium-term fundamentals. ASEAN expansion provides a new growth narrative. If RevPAR, franchise expansion, and membership traffic continue to improve, the current valuation of about 11x FY26E EV/EBITDA and a 5.7% free cash flow yield could support multiple re-rating; however, macro conditions, travel demand, franchisee financing, and overseas asset drag remain key variables that need to be validated.

Risks

• Macro conditions weaker than expected, leading to RevPAR growth below expectations.
• China financing channels weaker than expected, leading to fewer franchise additions than expected.
• Recovery in consumer and travel demand in China slower than expected.
• Dilutive M&A could reduce shareholder returns.
• Deutsche Hospitality operating performance weaker than expected and causing cash drag.

What to watch

• Whether RevPAR growth continues to progress as planned.
• Whether hotel additions and franchise expansion pace meet expectations.
• Whether H Reward investment continues to convert into member room-night growth and stable CRS contribution.
• Whether leisure travel and inbound tourism demand continue to improve.
• The pace of ASEAN expansion, the investment intensity, and the profitability path.
• Whether Deutsche Hospitality operating performance and cash burn improve.
• Whether HTHT valuation multiples and free cash flow yield continue to support the Buy thesis.