To The Moon

China’s stock market has long been a tale of giants—Alibaba (BABA) and $BYD Co., Ltd.(BYDDF)$ often steal the limelight. But beyond these headline-grabbers lies an emerging powerhouse that’s quietly making waves: $Atour Lifestyle Holdings Limited(ATAT)$. This hotel operator has been delivering impressive growth, and yet, it remains off the radar for many investors. That might be a mistake. Here’s why Atour deserves a place in your investment portfolio.

A rising star in China’s hospitality boom

A Stock Performance Story Worth Watching

Atour’s stock has been on a strong upward trajectory, currently trading at $29.50 (as of Feb 13, 2025), up 64.99% over the past year. With a 52-week range of $15.22 to $30.86, the stock has demonstrated resilience and investor confidence. Today’s gain of 0.82% further underscores the momentum.

The hospitality industry may not always offer the flashiest growth stories, but Atour is proving to be an exception. Unlike many competitors that struggle with fluctuating occupancy rates, Atour has built a loyal customer base through its premium boutique hotel model, which resonates with China’s growing middle class.

Strong Earnings and Valuation Metrics

Growth at this scale isn’t just about sales—it’s about profitability. Atour’s earnings per share (EPS) have steadily increased, with the most accurate estimate for the current quarter standing at $0.29. For 2024, EPS is projected to reach $1.24, up from $0.92 in 2023. Analysts expect sustained growth, with a 34.48% annual earnings growth rate over the next 3-5 years.

Atour’s financials show strong growth with room to run

From a valuation perspective, Atour remains attractive. It trades at a forward P/E ratio of 19.12, paired with a PEG ratio of just 0.55, suggesting significant growth potential at a reasonable price. Moreover, with a beta of 0.45, Atour exhibits lower volatility than the broader market, making it an appealing choice for risk-conscious investors.

A Dividend Sweetener in a Growth-Focused Package

High-growth stocks often reinvest earnings rather than reward shareholders. Not Atour. It bucks the trend by offering a dividend yield of 1.44%, or $0.42 per share. While that may not rival income-focused plays, it’s a rare bonus for a company in such a rapid expansion phase. This payout signals confidence in future cash flows, making Atour an appealing blend of growth and stability.

Trading Activity and Market Presence

Atour’s stock is gaining traction among investors, with 1.03 million shares traded today, exceeding its 20-day average volume of 801,755. With a market cap of $4.03 billion, Atour is no longer a small player in the space but a rising force in China’s hospitality sector.

Meanwhile, despite Chinese stocks rebounding, short interest in the FXI ETF remains at multi-year highs. Any sustained positive sentiment could trigger a rush to cover bearish bets, further fuelling gains.

The Broader Opportunity: China’s Undervalued Market

Atour isn’t just thriving in isolation—it’s part of a broader opportunity. Chinese stocks are trading at historically low valuations, creating a rare window for investors. This undervaluation stems from a combination of factors, including past regulatory uncertainty, geopolitical risks, a slowing economy, and the lingering effects of the zero-COVID policy.

Growth, stability, and an undervalued opportunity

Take $Alibaba(BABA)$, for instance: its P/E ratio sits at a mere 24x, a fraction of its 2020 valuation. Similarly, $JD.com(JD)$ and $TENCENT(00700)$ also trade at multiples significantly below their historical averages.

In this context of depressed valuations, Atour stands out. Its robust growth and profitability suggest it could be significantly re-rated as investor sentiment towards Chinese equities improves. While the risks mentioned above remain, the potential upside from a re-rating of Chinese stocks could be substantial, and Atour appears particularly well-positioned to benefit given its strong performance and focus on the growing domestic travel market.

Is Now the Time to Book a Stay?

Atour presents a compelling case. Strong stock performance, consistent revenue expansion, a best-in-class industry rating, and even a dividend—this is a rare mix in any market. While risks remain (China’s regulatory environment and economic recovery pace are always factors to consider), Atour’s fundamentals speak volumes.

Future earnings projections suggest sustained expansion and rising profitability

For investors willing to look beyond the usual suspects like Alibaba and BYD, Atour offers an underappreciated opportunity. With strong momentum and generationally low valuations across the sector, now could be the perfect time to check in before the price catches up to its potential.