The leading enterprises of outbound travel have obvious advantages in long-term accumulation. The company has been ploughing the field of outbound tourism for more than 20 years, forming a development pattern of outbound tourism and multi-business cooperation, closely combining B-end wholesale and C-end retail channels, and creating a comprehensive platform for outbound tourism business through the integration of resources. Before 2019, the company made great efforts to develop outbound travel business, with a compound annual growth rate of 28.8% from 2012 to 2019, achieving an increase from 2.15 billion yuan to 12.62 billion yuan. After 2020, its performance was seriously affected by the epidemic of COVID-19. With the optimization of epidemic prevention and control policies at home and abroad and the resumption of international flights, it is expected that the company's outbound travel business will be repaired in an orderly manner. with the quality optimization of business layout and internal cost reduction and efficiency, the company's performance is expected to open up new growth space.
The recovery pace of outbound tourism demand is slower than that of domestic tourism, and there is still a lot of room for growth. Compared with that before the epidemic, the recovery degree of outbound travel is still low, and the recovery of outbound travel demand is clear. According to the China Tourism Academy, the number of outbound tourists in the first half of 2023 was about 40.37 million, recovering from 81.29 million in the first half of 2019 to 49.7% in the first half of 2019. The number of domestic tourists in the first half of 2023 was about 2.384 billion, compared with 3.08 billion in the first half of 2019. The degree of recovery reached 77.4%. Compared with domestic tourism, the recovery of outbound tourism has higher certainty but slower pace.
The supply of the industry is clear, and the company has great flexibility to recover as the leading stock in the industry. The number of people employed by travel agencies nationwide in 2021 decreased by 137200 compared with 2019, a decrease of 33% compared with the same period last year. The epidemic has led to the stagnation of the operation of small and medium-sized travel agencies and benefited from the clear leader of the industry. The company has been ploughing overseas for a long time, and has remarkable advantages in brand influence, product quality, online and offline channel coverage, labor cost and so on. Benefiting from the accumulated advantages of brands, resources and channels, the company has quickly completed the expansion of the domestic tourism product market, forming a new pattern of domestic and foreign circulation. The joint venture with BABA Tourism to create a B2B Axin platform will help to improve the company's digital level and operational efficiency, and effectively save labor costs.
Investment advice: Zhongxin tourism is expected to benefit from the high demand and clear supply after the epidemic at the same time. It is estimated that the total operating income will be 37.72 / 118.96 / 14.41 billion yuan respectively from 2023 to 2025, corresponding to a year-on-year change of 653.6% / 215.4% / 21.1%. It is expected to achieve a net profit of 0.18 / 2.94 / 389 million yuan, corresponding to PE 436.3 / 26.8 / 20.3 times, covering it for the first time and giving it an "overweight" rating.
Risk hints: macroeconomic fluctuations lead to less-than-expected business recovery; repeated overseas epidemics lead to less-than-expected recovery of outbound travel; and intensified competition in the industry affects the company's operating performance.