The company announced its third quarterly report for 2020: in the first three quarters of 2020, the company achieved operating income of 1.386 billion yuan, year-on-year-77.50%, of which operating income was 573.4 million yuan in the third quarter,-76.94% year-on-year. In the first three quarters, the company realized net profit attributable to shareholders-149 million yuan, compared with the same period last year. Among them, the net profit attributable to shareholders in the third quarter was-13.0355 million yuan,-122.64% compared with the same period last year; the deduction of non-net profit was-13.5634 million yuan,-122.89% compared with the same period last year, which was in line with the performance forecast. In 2020, the sales / management expense rate of Q3 company was 11.61%, 11.99%, respectively, and the 21.46/23.76pct decreased compared with Q2, and the expense rate was significantly improved under the gradual recovery of business.

Outbound travel has not been resumed at present, and travel agencies are actively carrying out domestic tourism business. Affected by the epidemic, from January 27, 2020, the company's subsidiary Guangzhou Travel suspended the operation of group tourism and "air tickets + hotels" tourism products. On July 14, the Ministry of Culture and Tourism issued a notice officially resuming inter-provincial (autonomous regional and municipal) group tours, but inbound and outbound tourism business will not be resumed for the time being. At present, the Guang Tour official website still does not open up outbound travel products in accordance with the requirements, but mainly promotes domestic tourism and Guangdong tourism, focusing on developing domestic tourism, especially business opportunities for peripheral tours, and expanding strategic cooperation in sports, research, health and other market segments. In the third quarter of 2020, the company's business travel business realized that the revenue of domestic travel (including intra-provincial travel) increased by more than 600% compared with the previous quarter. During the eight-day National Day holiday this year, the country received a total of 637 million domestic tourists, down 21.0%. The average daily number of tourists was 8000, down 28.7% from the same period last year; domestic tourism revenue reached 466.56 billion yuan, down 30.1%. With the gradual improvement of the epidemic situation, we believe that domestic tourism will basically return to normal in the first half of next year, outbound tourism will be gradually liberalized next year, and the industry supply will be cleared quickly, and the industry leaders will benefit for a long time.

The hotel has made a profit in the third quarter, and the demand for clearing at the end of the industry is concentrated. In September, the operating revenue of the company's accommodation industry increased by more than 40% over the same period last year. In the third quarter, the company's subsidiaries Lingnan Hotel, Guangzhou Garden Hotel and China Hotel all made profits. From the perspective of the industry, the general occupancy rate of more than 50-60% can basically break even. Under the influence of the epidemic this year, there has been a wave of large-scale closure of individual hotels, and the remaining demand of the industry is rapidly concentrated to the head, so its recovery is obviously better than that of the industry as a whole. It is expected to return to normal level around the end of the year.

Profit forecast and investment suggestion: affected by the epidemic, the profit forecast of EPS for 20-21 years is reduced to-0.25exp 0.18 yuan (the original profit forecast for 20max for 21 years is 0.37max 0.39 yuan), and the EPS for 2022 is 0.36 yuan, corresponding to the PE of 21max for 22nd year is 44max. 22 times. Taking into account the current policy of outbound and group tours has not been liberalized and the international epidemic situation is repeated, the rating was downgraded from "overweight" to "neutral".

Risk hints: the growing epidemic has an impact on demand; the liberalization of inbound and outbound tourism policy continues to be delayed.