UPDATE: J.P. Morgan Raises PT on Home Inns & Hotels Management on Strong 2Q Results

In a report published on Tuesday, J.P. Morgan analyst Kenneth Fong raised the price target on

from $36 to $40 and reiterated an Overweight rating. In the report, J.P. Morgan stated, "Headline net revenue (net of business tax) grew 10% yoy to Rmb1.5bn (inline) with flat same hotel RevPAR yoy. Adjusted EBITDA was Rmb394mn, up 19% yoy with the surprise coming from the EBITDA margin of 24.6% (+1.7% yoy). The margin improvement mainly come from 1) Cost control: total cost as a % of leased and operated hotel's revenue (L&O) fell 2% yoy to 84%. The cost saving is mainly from personnel expenses on lower bonus accrual and more efficient staffing. During the year, HMIN reduced 2-3 staff per hotel; this led to a flat personnel cost yoy despite more hotels opened and a 5% wage increase in 2Q13. 2) Operating leverage enhancement: Sales and marketing and G&A expenses as a % of L&O hotel revenue fell to 6.6% (from 6.8% in 1Q12) and 3) Better business mix: higher margin franchise hotel revenue grew 26% yoy vs L&O 9%." Home Inns & Hotels Management closed on Monday at $29.17.