Recently, the company released its report for the first quarter of 2023. In Q1 of '23, the company achieved revenue of 477 million yuan, YOY +154.39%, net profit of the mother of the mother of the mother was 190 million yuan, yoy +111.47%, net profit of the non-return mother was 0.07 million yuan, yoy +109.12%. The Q1 performance turned a year-on-year loss into a profit. Benefiting from the loosening of inbound and outbound travel policies and the release of travel demand, the company's main business is recovering strongly. We are optimistic that the company's revenue recovery will continue to improve throughout the year.
Key points to support ratings
The two benefits of the policy market were combined, and the 23Q1 performance turned a loss into a profit. The company achieved revenue of 477 million yuan in Q23, YOY +154.39%, net profit of 8.7084 million yuan, YOY +111.47%, net profit of 7.0828 million yuan after deducting non-return mother's net profit, YOY +109.12%. The performance turned a loss into a profit compared to Q1 in '22. The company's inbound and outbound travel business was disrupted by the epidemic and did not recover in '22. The increase in Q1 performance in '23 was mainly due to the deregulation of the epidemic, the gradual liberalization of travel agencies' inbound and outbound group tour pilots, and the recovery in the company's main business demand, such as business travel and lodging, which led to business recovery.
The resumption of inbound and outbound travel boosted confidence, and the main business showed a high degree of resilience. On the travel agency side, after the Ministry of Culture and Tourism gradually liberalized inbound and outbound group travel, the company's holding subsidiary Guang Tour responded positively to the call and resumed the corresponding inbound and outbound group travel and “flight+hotel” business, and organized more than 10 national first trips to destinations such as Egypt, the United Arab Emirates, Thailand, Cambodia, Kenya, Russia, Sri Lanka, and New Zealand. In addition, Q1 Guangzhou Tour's subsidiary branches outside of its South China headquarters contributed nearly 40% to the revenue growth of the business travel business, and the national layout strategy continued to show results.
On the hotel side, benefiting from the recovery in travel, the 23Q1 company's hotel management business revenue exceeded the same period in '19, and the total revenue from the hotel business was close to the same period in '19. Garden Hotel's main operating indicators such as revenue, average room prices, and room rate increased compared to '19. In terms of exhibitions, the company has long-term experience in the exhibition business and has strong resource advantages. The Q1 exhibition industry in Guangdong Province has seen an accelerated recovery. The number of exhibitions and exhibition area have recovered to 115% and 102% respectively in 2019. Combined with the hosting of the Q2 Canton Fair, the recovery in exhibition demand is expected to bring a new increase in the company's performance. Overall, the company's main business has a high degree of recovery elasticity, and market recovery expectations have been gradually verified. The company is seizing the opportunity for rapid market recovery and is optimistic about the accelerated recovery of performance for the full year of 23.
The financial situation is sound, and financial support drives the development of the subsidiary. Q1 The company's balance to debt ratio was 32.38%, net cash flow from operating activities was $22 million, YOY +118.49%, and the overall financial situation continued to be stable. In January '23, in order to support the development of subsidiaries and reduce financing costs for subsidiaries, the company plans to provide financial support to its subsidiaries Garden Hotel, China Hotel, Lingnan Hotel, and Guangzhou Tour. It is hoped to improve the operating conditions of the subsidiaries and boost their profit levels.
valuations
The company's main business has recovered strongly in Q1, and the company's tourism industry chain has significant resource advantages. Currently, inbound and outbound travel is gradually resuming, and demand for the exhibition and business travel and accommodation business is high. We are optimistic that the company's annual performance will recover at an accelerated pace. We maintained the 23-25 EPS at $0.21/0.42/0.48, and the corresponding price-earnings ratio was 51.8/26.6/23.3 times. Maintain the increase in holdings rating.
The main risks faced by ratings
There is a risk of uncertainty in inbound and outbound tourism policies, risk of industry recovery falling short of expectations, and market competition risk.