Incident Overview
The company released its 1H23 financial report, achieving operating income of 570 million yuan/+398% year-on-year, net profit of 190 million yuan, loss of 37.39 million yuan in the same period last year, deducting 110 million yuan in non-net profit, and 99.2 million yuan in the same period last year. 23Q2 The company achieved revenue of 5.1 million yuan/+596% year on year, net profit of 200 million yuan, +369% year on year, deducted 150 million yuan in non-net profit, and turned loss into profit.
Analytical judgment:
The main business has fully recovered, and the high growth rate of exhibitions in the second half of the year is expected to continue from March 2023, and offline exhibitions have fully recovered. The company hosted and hosted 10 exhibitions in the first half of the year, with a total scale of about 570,000 square meters; hosted 4 road racing events, with a total number of participants exceeding 26,000; the Shanghai World Expo Exhibition Hall operated by the company hosted 38 exhibitions and events, with a total rental area of over 5 million square meters. In the first half of the year, the company achieved revenue of 3.1, 0.4, 0.8 and 50 million yuan respectively from exhibition organization, event activities, exhibition support services, and exhibition hall operation. According to the company's May customs investment activity record and the company's official website, there is a rich schedule of important exhibitions for the second half of the year, including the World Artificial Intelligence Conference, China International Industry Fair, Shanghai Marathon, and Oriental International Interventional Medicine Fair. We expect the high growth rate of the main business to continue in the second half of the year.
The overall recovery of business led to a sharp decline in the expense ratio. When investment income was greatly improved and revenue was fully recovered, the cost ratio was drastically reduced. The 23H1 sales expense ratio fell sharply by 16.3 pc to 4.0% year on year, the management expense rate decreased by 33.8 pct to 11.9% year on year, and the financial expense ratio decreased by 1.3 pct to 1.7% year on year. In terms of non-operating factors, 23H1 Company 1) received income from changes in the fair value of its financial assets of 1986 million yuan, a significant improvement over the same period last year; 2) received 130 million yuan in investment allocations from the Shanghai Huaduo Equity Investment Fund partnership; 3) received 58.91 million yuan in compensation from the Shanghai Wentai Sports Shoe Factory. Investment incomes+recovery in the main business led to a sharp increase in the company's net interest rate.
Grasping the core IP, with policy support, is expected to usher in a stage of accelerated development. On June 21, 2023, the Shanghai Municipal Commission of Commerce issued the “Shanghai Three-Year Action Plan to Promote High-Quality Development of the Exhibition Economy and Build an International Exhibition Capital (2023-2025)” (Shanghai Chamber of Commerce and Exhibition (2023) No. 160). According to the plan, by 2025, Shanghai Convention and Exhibition's ability to allocate global resources will be further enhanced, the global influence and international competitiveness of Shanghai Convention and Exhibition will be further enhanced, the market mechanism will be more mature, exhibition enterprises will be more dynamic, brand exhibitions will be more concentrated, and the international convention and exhibition capital will be fully built. As an enterprise directly under the Shanghai State-owned Assets Administration Commission, the company focuses on the main exhibition business, grasps core IPs such as the Industrial Fair, the Guangzhou Printing Exhibition, and the World Internet Conference. With “Exhibition China” and “Digital Exhibition” as the two major development strategies, endogenous development and extended M&A two-wheel drive are expected to fully enjoy the industry and location dividends, thus ushering in a new stage of development.
Investment advice
We maintain our previous profit forecast. We expect the company to achieve revenue of 17.0/20.2/2.30 billion yuan respectively in 23-25, net profit at the parent level of 30/30/350 million yuan, and EPS at 0.56/0.57/0.66 respectively. Referring to the closing price of 11.89 yuan/share on August 28, 2023, the corresponding latest PE is 21x/21x/18x, respectively, maintaining the company's “buy” rating.
Risk warning
(1) The influence of the company's core exhibition IP is declining; (2) the company's new IP is not cultivating; (and 3 pre-trial) extended mergers and acquisitions fell short of expectations.