Haichang Ocean Park is the only private marine theme park operator with national layout. It has the largest amount of marine biological resources in Asia and the park has the leading operating capacity. In the short term, the impact of the epidemic still exists, but we expect the company's park business to recover quickly when passenger traffic picks up, and with the construction of the second phase of the project, Shanghai Park is expected to further realize its growth potential. The company has completed the asset transaction with the MBK fund and entered a new strategic development period of light assets. The continuous layout of the boutique aquarium and the linkage with high-quality IP are expected to open up a new growth path for the company.

Ocean theme park leader, divest mature park to optimize asset structure. The company is currently the largest operator of marine theme parks in China, with a total of 10 theme parks operated under the brand "Haichang" throughout the country. In 2021, the company achieved an income of 2.46 billion yuan, accounting for 74.1%, 23.7%, 2.1%, respectively, of park operation / property sales / cultural and travel services and solutions, and the park operation income has returned to 66.8% of 2019 (vs.

Domestic tourism revenue recovered to 58.6%), with the recovery rate leading in the industry. Orix Group, with a stake of about 15%, is the second largest shareholder of the company, and its rich experience in theme park operation is expected to produce continuous synergy with the company. In 2021, the company completed the asset transaction with the MBK fund, divested four mature parks, reduced debt pressure, while focusing more resources on core city theme parks and light asset business development, and further optimized the asset structure.

The advantages of biological resources and conservation are outstanding, and the operation ability of the whole process is leading. The company has the largest number of marine living resources in Asia, with more than 140000 marine and polar organisms and more than 1000 large marine land animals. At the same time, the company has a professional conservation team of more than 1000 people, which has led the domestic and international leaders in breeding species and quantity for more than ten years. The company is the only private marine theme park operator with national layout. In terms of the layout of popular tourist cities, the company has established the first-mover advantage of card seats. The company has the whole process operation ability from scheme design, location planning, development and construction to park construction. The Shanghai project achieved about 3.5 million visitors and 3.04 million ticket sales in its first full year of operation (2019). Based on this, we estimate that the revenue of the project that year may reach about 1 billion yuan, and the financial level is close to the break-even level. we believe that the operating results of the Shanghai project in the first year are more outstanding in the domestic theme park industry.

The park business is waiting for recovery, and the Shanghai project has outstanding potential. The company's park business came under significant pressure in the first half of this year due to the epidemic. However, we believe that the control of the epidemic will eventually be relaxed, and when passenger traffic picks up, the company's theme park is expected to show a better recovery momentum than the industry (see 2021H1 park revenue recovery of more than 80%). With the construction of the second phase of the Shanghai Park project, the number of guest rooms is expected to increase from 309 in 2019 to more than 1500 in 2025, and hotel revenue is expected to increase significantly. In addition, the per capita catering consumption of Shanghai Park in 2021 is only about 48 yuan. Disney and other parks have great potential to improve. And the second phase of Shanghai will operate in a light asset mode, and the profit margin is expected to be better than that of the first phase.

The continuous distribution of light assets, linkage with high-quality IP to open up new growth. The triple endowments of the company's biological resources, operating capacity and shareholder coordination lay the foundation for the light asset business. In 2021, the company entered a new strategic development period of light assets. As of May 2022, the cultural and travel services and solutions business has covered more than 30 cities across the country and signed a total of more than 80 projects. In the same month, the first batch of five "aquariums / marine exploration halls" landed. We estimate that a single boutique aquarium will contribute at least 1000 million yuan a year to the company in a mature state, and the company plans to expand more than 100 aquariums in China. Only the potential revenue increment brought by this may be more than 1 billion yuan. In July 2022, the world's first Altman theme entertainment area officially landed in Shanghai Park, which has shown strong passenger flow attraction and consumer cluster effect in the summer, and the linkage with high-quality IP is expected to open up a new growth point for the company.

Risk factors: local epidemic situation is repeated; policy control is tightened; macroeconomic is weaker than expected; Shanghai park passenger flow and secondary consumption growth is lower than expected; light asset business expansion is not as expected; IP business development is not as expected.

Investment suggestion: Haichang Ocean Park is the largest ocean theme park operator in China and the only private ocean theme park operator with national layout. The company has the first marine biological resources in Asia, the world's leading biological conservation capacity, and has been stuck in the core city, with a strong theme park full-process operation and management capabilities, resources and operational barriers. At this stage, under the influence of the epidemic, the fundamentals of the company are still under pressure, but combined with the recovery of 2021H1, the company's theme park is expected to show a better recovery momentum than the industry. We believe that the current company stands at a new starting point of development, and the divestiture of four mature parks, core projects and light assets business will significantly optimize the company's asset structure and financial structure. Looking to the future, the construction of the second phase of Shanghai is expected to greatly enhance the tourist reception capacity of the park and the number of hotel rooms, and the growth potential of Shanghai Park is still considerable. Moreover, in the next few years, with the expansion of the product range of "Aquarium / Ocean Exploration Pavilion" and the linkage between the company and high-quality IP, the light asset business is expected to usher in great-leap-forward development. We estimate that the net return profit of the company in 2022, 2023, and 2024 will be-442, 143x423 million, respectively. Considering the large increase in the company's share price in the past two years, we judge that the expectation for the development of the light asset business has been implied, and it is suggested that we should pay attention to the follow-up progress. On September 5, the company's shares have been officially transferred to the Hong Kong Stock Exchange, and liquidity is expected to further improve.