Description of the event

The company released its 2023 mid-year report. During the period, it achieved revenue of 792 million yuan (+528.6%), loss of attributable performance of 35 million yuan (+57.3%), net of non-attributable performance loss of 37 million yuan (+55.95%), and EPS-0.04 yuan. Among them, Q2 achieved revenue of 655 million yuan (+883.22%), recovering to 20% of the same period in 2019; net profit due to mother was 2.9762 million yuan (+112.45%), and the outbound group tour business gradually recovered during the period. The company's loss margin narrowed sharply compared to the same period last year. It achieved profit in the first quarter since the epidemic, returning to 6.6% in the same period in 2019; net profit not attributable to the same period in 2019 was 2.143,900 yuan (+108.56%).

Incident reviews

The outbound team tour business has resumed, and the 2023Q2 business environment has improved markedly. Currently, the Ministry of Culture, Tourism and Tourism has published a list of three batches of countries that have resumed outbound group tour flights+hotels. Currently, the number of countries that have opened outbound group tour destinations has increased to 138. In the long-term travel market, countries such as France, Italy, Spain and Portugal, and the short-term market, Xinmatai, have all resumed outbound group tour business. Revenue contributed by overseas companies continued to grow rapidly, with 300% in the same period last year, and gross profit contribution exceeding 400% over the same period last year.

At the end of the period, the number of retail stores nationwide reached 1,300, a net increase of 370 over the same period last year. The volume scale has already exceeded the level at the end of 2019. The travel wholesale business achieved revenue of 377 million yuan (+3959.25%) and the travel retail business revenue of 130 million yuan (+373.67%), which recovered to 8.9% and 13.7% in the same period in 2019, respectively; gross margins were 13.43% and 11.6%, respectively, compared to the same period last year +63.15 pct and -8.33 pct, respectively, compared to the same period of the previous year, and +4.91 pct and -4.69 pct.

The company's gross profit margin during the period was 11.01% (-3.84pct), and the net interest rate was -4.77% (+70.08%). The overall expense ratio is 17.03% (-89.12pct), of which the sales expense ratio is 10.94% (-45.41pct), the management expense rate is 5.62% (-21.77pct), and the financial expense ratio of 0.47% (-21.94pct) means that all of the company's convertible bonds were converted or settled in 2022. The size of the company's interest-bearing debt during the period dropped significantly compared to the previous period. Net cash flow from operating activities was 4.26 million yuan, an increase of 147 million yuan over the same period of the previous year. This is due to rapid growth in the company's business and pre-sale customer payments.

Investment advice

International flight capacity continued to increase during the year. In July, domestic airlines actually carried out more than 20,000 inbound and outbound passenger flights, and the number of inbound and outbound passengers by domestic airlines exceeded 3.6 million, recovering to around 53% of the same period in 2019. As a leading supplier of outbound travel wholesale and retail, the company is expected to take the lead in handling outbound demand. We expect the company's EPS in 2023-2025 to be 0.06\ 0.28\ 0.39 yuan, corresponding to the company's closing price of 7.84 yuan on August 25, and PE in 2023-2025 to be 128.7\ 28.1\ 20 times, respectively. For the first time, coverage was given a “holdings increase - B” rating.

Risk warning

The recovery in consumer consumption fell short of expectations; the risk of changes in immigration policies; the risk of market competition.