The current situation of the company
The company announced that it intends to accept the 56% stake in Huangshan Taiping Lake Cultural Tourism Co., Ltd. (the target company of Taiping Lake Project) held by Huangshan District SASAC, with a listing transfer price of 112 million yuan, which is only 3.88% higher than the book net asset value.
Comment
Taiping Lake project has a superior location and rich resources. Taiping Lake is a national 4A scenic spot, located in the northwest of Huangshan District, about 400 kilometers away from Hangzhou, Suzhou, Shanghai and other core cities in the Yangtze River Delta, and is an important peripheral tourist destination in the Yangtze River Delta. Taiping Lake is rich in tourism resources, with five scenic spots: Gongxing, Guangyang, Bauhinia, Longmen and Sanmen. It is also the origin of Taiping Houkui Tea, one of the top ten famous teas in China, and the main producing area of Huangshan Maofeng.
The passenger flow of Taiping Lake has a great prospect of growth. In 2017, the Taiping Lake Scenic spot received 1.072 million passengers and realized ticket revenue of 20.204 million yuan. At present, the Taiping Lake Scenic spot is still stepping up its development efforts, and the local government has formulated the overall Plan of the Taiping Lake Scenic spot (2015 Mel 2030). It is planned to designate the main waters of Taiping Lake, the Little three Gorges, Wushi Wetland and the Golden Islands as core scenic areas, with a total area of 103square kilometers. It is estimated that the tourist flow of Taiping Lake Scenic area will reach 2.16 million person-times per year in 2020 (implied annual compound growth rate of more than 20%), and reach 4.17 million person-times per year in 2030.
The expansion of the extension has been promoted in an orderly manner, and the opening of the Hangzhou-Yellow high-speed railway has brought about a deterministic increase in passenger flow. The company is steadily promoting "one mountain, one water, one village and one cave" around the strategy of "going down the mountain, going out".
The resource layout of scenic spots, Hongcun, Huashan riddle Grottoes, international tourist towns and other projects are also being accelerated. In addition, the Hangzhou-Yellow high-speed railway is expected to open in October this year, and Huangshan will be included in the "four-hour traffic circle" in China's richest Yangtze River Delta region, bringing a deterministic increase in passenger flow to the company.
Valuation proposal
We will keep the company's profit forecast unchanged for the time being and adjust it after the release of specific information.
At present, the company's shares are trading at a price-to-earnings ratio of 18.9 in 2019, which is 16.6 times earnings, which is at a nearly five-year low. We maintain our recommended rating on Huangshan Tourism Aamp B shares, with A shares priced at 18.11 yuan (2018 30 times earnings) and B shares priced at $1.95 (2018 20 times earnings), with upside space of 58.6% and 67.0%, respectively.
Risk
The bad weather has a negative impact on the passenger flow of the scenic spot, and the extension expansion project is not as fast as expected.
