UPDATE: J.P. Morgan Maintains On Higher Margin Assumptions

In a report published Monday, J.P. Morgan analyst Kenneth Fong maintained an Overweight rating on Home Inns & Hotels Management

and raised the price target from $40.00 to $46.00. In the report, J.P. Morgan says "HMIN reported stronger-than-expected 3Q adjusted EBITDA of Rmb448mn (JPMe: Rmb 406mn). Total revenue of Rmb1.74bn is in-line and the beat is mainly from better margin (on personnel cost savings, operating leverage and increased contribution from franchise hotels). Management outlook is positive and seeing stronger overall demand (from Oct and Nov so far). Margin is expected to continue expanding from business mix changes to more franchise models, continued ramp-up of Motel 168, and stringent cost control. Free cash flow should be positive starting from this year, paving the way for further debt reduction and dividend potential in 2015. We raise our PT to US46.0/ADR on rolling forward to Dec-14 (from Jun-14) and higher margin assumptions. Stay OW." Home Inns & Hotel Management closed on Friday at $41.31.