Conclusions and suggestions:
The company released three quarterly reports, which were dragged down by the travel agency business and the overall performance was lower than expected. The opening of the Hang-Huang high-speed railway in June 2018 contributes to passenger flow growth. We expect that the company's performance will be greatly improved in 2018. We estimate that the company's net profit from 2017 to 2018 will be 386 million yuan and 462 million yuan, and YoY will increase by 9.65% and 19.64% respectively, corresponding to 0.52 yuan and 0.62 yuan per share. The stock price before that will be rated as 30 times and 25 times PE respectively.
According to the company's quarterly report for 2017, the operating income in the first-third quarter was 1.32 billion yuan, an increase of 6.7 percent over the same period last year; the net profit attributed to shareholders of listed companies was 340 million yuan, up 4.97 percent from the same period last year; and earnings per share was 0.46 yuan, up 4.97 percent year-on-year. The gross profit margin in the first three quarters was 52.17%, which was basically the same as that in the same period last year.
On a quarterly basis, 3Q achieved an operating income of 592 million yuan, an increase of 17.7% over the same period last year, mainly due to a significant increase in abnormal weather and rainfall in 2016, which led to a decrease in passenger flow in the peak season, resulting in a lower income in the same period last year. The elimination of abnormal weather conditions this year has led to a rebound in passenger traffic. The net profit attributed to shareholders of listed companies was 155 million yuan, up 2.9% from the same period last year, and the gross profit margin was 51.1%, down 5.2 percentage points from the same period last year, which was lower than expected. Due to the steady growth of the company's main profit growth point, the ropeway business, the company's gross profit margin has declined significantly due to the substantial increase in revenue from the real estate business with low gross margin and the decline in the travel agency business. At present, the company has transferred its subsidiary Yuping real estate to the group, and it is expected that the profit fluctuation caused by the change in income structure will not last, the company will focus more on tourism and scenic spots related business in the future, and the gross profit margin is expected to pick up.
Main viewpoints: 1) benefiting from good weather conditions, during the National Day and Mid-Autumn Festival, Huangshan Scenic spot received a total of 180600 tourists, an increase of 26700 over National Day holiday last year (7 days), an increase of 17% over the same period last year, and overall steady growth. Huangshan maintains a good tourist popularity. 2) the Yangtze River Delta region is the largest source of passengers in Huangshan except Anhui Province (about 30% of the total). The Hangzhou-Yellow High-speed Railway is expected to be completed and opened to traffic in June 2018. the opening of high-speed rail will promote the performance growth of scenic spots (during the opening of Jingfu high-speed railway and Hefu high-speed rail in 2014 and 2015, the company's net profit will increase by 45.5% and 41% respectively), and the future transportation network will be more perfect, which will be beneficial to promote weekend travel. And attract more passenger flow in the Yangtze River Delta (expected to be 1.5 hours in Hangzhou, 2.5 hours in Shanghai and 2 hours from Nanjing to Huangshan respectively).
To sum up, considering the boost to Huangshan passenger flow after the opening of the high-speed railway, regardless of the extreme weather conditions, the stock price was given a buy rating of 30 times and 25 times PE respectively.
