Event: The company released 1H23 earnings report. 1H23 achieved revenue of 3,370 million yuan/yoy +4881%, net profit of 583 million yuan/yoy +807.55%, minus net profit of 478 million yuan/yoy +1350.75%; of these, 2Q23 achieved revenue of 2.111 million yuan/yoy +96.23%, net profit of 350 million yuan/yoy +3331.54%, less net profit of 281 million yuan/yoy +824.65%. The increase in the company's revenue was mainly due to improved market conditions in the airport and hotel business in the first half of the year, combined with the carry-over of real estate projects.
The company's profit level has improved markedly. 1H23 achieved a gross profit margin of 44.48% /+5.95pcts, the sales/management/finance expense ratio was 2.32%/10.20%/8.12%, year-on-year change -0.20/-2.81/-3.54 pcts, gross margin increase and superimposed expense ratio improvement, 1H23's net interest rate increased 16.05 pcts over 1H22 to 18.53%; 2Q23, the company achieved a gross profit margin of 40.89% /+5.62pcts, sales/management/finance expense ratio 1.88%/8.37%/ 8.01%, a year-on-year change of +1.33/-5.82/-5.49pcts, respectively, led to a significant improvement in net interest rate to 16.96% (-2.72% in the same period last year).
The airport business is recovering well, with operating indicators exceeding the same period in 2019. At 1H23, the airport business generated 956 million yuan in revenue. The number of flights taken off and landed by its nine airport aircraft, and the passenger throughput and cargo and mail throughput recovered to 115.94%, 109.93%, and 106.40% in the same period in 2019. Among them, the three indicators of Sanya Phoenix International Airport recovered to 111.67%, 108.02%, and 97.62% in the same period in 2019, and its duty-free related business generated 120 million yuan in revenue.
Tax exemptions and commercial business are growing steadily. 1H23's duty-free and commercial business achieved revenue of 140 million yuan, of which Island Commercial achieved revenue of 58 million yuan by providing duty-free shop space leases; Island Commercial achieved investment income of 63 million yuan by participating in the duty-free shop at Haikou Meilan Airport. In addition, Sanya Phoenix Airport's duty-free related revenue was 120 million yuan. This portion of the business revenue was included in the airport management business. Among them, franchise revenue obtained by providing duty-free shop venue leases was 84 million yuan, franchise revenue obtained by providing duty-free pick-up point leases was 36 million yuan, and investment income of 115 million yuan was achieved through participation in duty-free shops at Sanya Phoenix Airport.
Accelerate the removal of existing real estate, expand the airport industry, and steadily grow property and other businesses. The company's real estate business achieved revenue of 1,522 billion yuan, an increase of 141% over the previous year. It mainly carried forward revenue from the Haoting Nanyuan C14 project. At the same time, the company focused on speeding up the removal of existing real estate projects and actively expanding land for the airport industrial project. Property management achieved revenue of 353 million yuan, a year-on-year decrease of 14%. The total management area of the company exceeded 17 million square meters, and a total of 191 projects were managed. The company's other businesses generated revenue of 399 million yuan, including the hotel business of 156 million yuan (excluding Sanya Phoenix International Airport Hotel) and 193 million yuan from Tianyu Fei Xun.
Investment suggestions: The company is deeply involved in the construction of the Hainan Free Trade Port. Many of its businesses, such as airport management, duty-free commerce, and property management, enjoy the free trade port policy dividends, and the company's medium- to long-term development prospects are promising. We expect the company's net profit to be 1,066/14.82/1,809 billion yuan in 2023-2025, a year-on-year change of -42.6%/39.1%/22.0%. The PE corresponding to the current market value is 43X/31/25X, maintaining the “recommended” rating.
Risk warning: macroeconomic decline; airport passenger flow falling short of expectations; changes in outlying island tax exemption policies, etc.