The leading marine theme park operator in China; for the first time, Haichang Ocean Park was covered by a “ownership” rating and is the only marine park operator in China that has achieved a nationwide layout. As of '22, the company owns and operates 6 large-scale theme parks under the “Haichang” brand and 1 park under construction, with outstanding scale advantages. The company is reshaping its governance structure, increasing asset-light management output and new IP business formats, and preparing to issue REITs. It is expected to capitalize on the revival of cultural tourism and usher in both operational and financial improvements. It is predicted that the EPS for 23-25 will be 0.01/0.04/0.06 yuan, giving the company 11X EV/EBITDA for 24 years, with a target price of HK$1.07 (higher than the 10X unanimous expectation of Bloomberg of a comparable company in '24. Leading scarce theme parks in China have far-reaching influence, new projects driving high performance, and recognition of leading premiums). The first review gave a “hold” rating.

Ocean Park themes are scarce to meet new consumer demand

Due to the difficulty of marine life conservation and strict procurement channel control, large-scale marine theme park brands are scarce in China, and leading companies have a clear first-mover advantage. According to AECOM, China's ocean parks only accounted for 15% of city-level theme parks in 2020. At the same time, the demand potential for Ocean Park is considerable. According to McKinsey, China's theme park market penetration rate in '22 was only 27%, far below the average of developed markets (68%). In the post-epidemic recovery phase, demand for family trips and experiential tourism has exploded. Marine theme parks with diverse entertainment methods and scenarios, education and fun may continue to benefit.

Animal assets and operating capabilities build a moat. Nirvana, the leader, has been deeply involved in Ocean Park for 20 years in Haichang. It has over 140,000 marine/polar biological resources and a professional conservation team of 1,000 people. There are high barriers in terms of brand/scale/resources/operation. At the same time, the company dared to break the ground and build a new one. In '21, it sold 4 parks in a timely manner to solve financial difficulties, solicited professionals on the management side to improve management efficiency, deepened cooperation with special IPs such as Ultraman, etc., and increased the park's passenger flow and secondary consumption revenue space.

We believe that during the post-pandemic recovery period, the company may experience a double improvement in revenue and profit.

Privileged and important, the large-scale theme park+boutique oceanarium chain+IP derivative content export three-wheel drive company is currently building Shanghai Park Phase II, and the Zhengzhou project is rich in highlights. If it is successfully implemented in 23-25, it is expected to significantly increase the company's revenue. As of 2023.4, the company has completed 25 boutique aquariums and 1 children's ice and snow center projects, with the goal of developing 100 oceanarium chains. In July '22, the world's first Ultraman theme pavilion landed in Shanghai Park. We believe that asset-light management and new IP consumption strategies can better achieve the reuse of the company's existing core management capabilities and brand traffic, and may become the company's new performance growth curve in the medium to long term.

Target price HK$1.07; give a “hold” rating

We expect EPS of 23-25 to be 0.01/0.04/0.06 yuan. Considering that multiple projects are scheduled to be implemented by the end of 23 and reflected in the company's revenue and performance in year 24, we made a valuation based on EBITDA in 2024 and obtained a target price of HK$1.07, corresponding to 11X EV/EBITDA in 2014 (higher than the 10X expected by Bloomberg in 24). Scarce domestic theme park leaders have far-reaching influence. New projects and new business landing drive the company's high performance and recognition of leading premiums. The first coverage gives a “hold” rating.

Risk warning: macroeconomic fluctuations, new business expansion falling short of expectations, expiration of licenses, and damage to biological resources.