Q3 revenue increased significantly month-on-month, optimistic about passenger flow recovery Q4 performance elasticity, maintain "buy" rating company 2023Q3 realized operating income of 178 million yuan (year-on-year +15.04%, month-on-month +71.12%), realized parent net profit of 51.61 million yuan (year-on-year-17.90%, month-on-month +771.75%). In the first three quarters of 2023, the operating income was RMB 433 million yuan (year-on-year +3.52%), and the net profit attributable to the parent company was RMB 121 million yuan (year-on-year--7.52%). The revenue growth in Q3 of 2023 was mainly due to the recovery of railway passenger flow, which significantly promoted the recovery of high-speed rail advertising business. The year-on-year decrease in net profit of parent company was mainly due to the relatively high investment in the early stage of outdoor naked-eye 3D HD large-screen business of the Company, and the lag of revenue end.

Considering that the company's outdoor large screen business is in the initial stage of expansion, we have lowered our profit forecast for 2023-2025, predicting that the company's net profit attributable to the parent company from 2023 to 2025 will be 1.64/2.07/2.51 million yuan respectively.(The value before 2023-2025 is 2.44/3.50/4.64 million yuan), corresponding EPS is 0.57/0.71/0.87 yuan respectively, and the current stock price corresponds to PE 32.0/25.4/20.9 times respectively. We are optimistic about the long-term growth space of the company's performance and maintain the "buy" rating.

The tourism demand in Q3 of 2023 increased greatly. The gross profit rate of the Company in Q3 of 2023 was 48.32%(year-on-year--7.96pct) driven by the Asian Games upsurge superimposed on the National Day holiday, mainly due to the loss of outdoor large screen business. The net interest rate of the Company in Q3 of 2023 was 28.99%(year-on-year--11.63pct), mainly due to the increase of credit impairment loss of RMB 8,670,200 Yuan compared with Q2 of 2023. In terms of passenger flow, according to China Railway, 1.15 billion passengers were sent by railways nationwide in Q3 2023, an increase of 11.6% compared with the same period in 2019. Looking forward to 2023Q4, according to the Ministry of Culture and Tourism, the number of domestic tourists from September 29 to October 5 was 754 million, with a year-on-year growth of 78.9%. The National Day holiday superimposed the Asian Games upsurge, the high-speed rail flow resumed, the demand of advertisers increased, or the company's high-speed rail advertising revenue continued to grow.

Key business districts are booming, the company continues to add code content production capacity, outdoor large-screen business profitability can be expected business big data monitoring shows that the Mid-Autumn National Day holiday, key business districts and national demonstration pedestrian street daily passenger flow increased by 1.6 times and 87.4% respectively year-on-year. The company actively expands the outdoor media business territory of the business circle. The 1400 ㎡, 550 ㎡, 1536㎡, 1505 ㎡, 1836 ㎡ and 653 ㎡ outdoor naked-eye 3D large screens built in the core business circles of Guangzhou, Taiyuan, Guiyang, Chengdu, Chongqing and Beijing have been put into operation. At the content production end, the company independently produces and launches many naked-eye 3D digital content blockbusters such as Evolution Theory to consolidate the production capability of 3D projects. We believe that the company is committed to creating a content-enabled outdoor media ecosystem. With the high boom in travel demand, it is expected to drive the continuous repair of high-speed rail media and outdoor large screen businesses.

Risk hint: the demand of advertisers is declining, and the expansion of new advertising sites is not as expected.