The company released the 23Q3 quarterly report. In the first three quarters, it achieved revenue of 433 million yuan, a year-on-year increase of 3.52%; realized net profit of 121 million yuan, a year-on-year decrease of 7.52%; in the Q3 single quarter, it achieved operating income of 178 million yuan, an increase of 15.04% year-on-year, and net profit of 51 million yuan, a year-on-year decrease of 17.90%.

Railway passenger traffic is recovering rapidly, and the value of high-speed rail media resources is expected to regain market recognition. 23 In the first three quarters of the year, the country's railway passenger turnover was 1153.6 billion kilometers, up 111.3% year on year, and the country's passenger traffic was 2.8 billion, up 110.9% year on year; China Railway Group promoted railway construction in an orderly manner. National Railways completed fixed asset investment of 508.9 billion yuan, an increase of 7.1% over the previous year, and put into production new railway lines with a mileage of 1,402 kilometers, of which 1,246 kilometers for high-speed rail. At the macro level, the gross domestic product for the first three quarters was 91 trillion yuan, up 5.2% year on year at constant prices; total retail sales of social consumer goods were 34 trillion yuan, up 6.8% year on year. Advertisers' willingness to advertise on high-speed rail is expected to recover at the same time as railway passenger traffic and the economic situation.

The moat of high-speed rail media resources is strong, and major customer exhibitors are progressing steadily. As of September, Zhaoxun Media has signed media resource use agreements with 17 of 18 railway administration groups in China, and has built its own high-speed rail digital media network covering 30 provincial administrative districts across the country and reaching more than 1 billion passengers per year. The resource area covers many economically developed regions such as the Yangtze River Delta, the Pearl River, the Bohai Rim, and the southeast coast, forming a digital media network with high-speed rail train stations as the core and laying out the national railway network. Similarly, the company has contracted 574 railway passenger terminals and opened and operated 470 railway passenger terminals. More than 96% of these are high-speed rail stations, operating 5,418 digital media screens, making it one of the digital media operators with the widest coverage of media resources in the high-speed rail digital media advertising industry. The company has established strategic partnerships with many famous enterprises in the automotive, real estate, alcohol, consumer goods, Internet, food and beverage industries, etc., and newly introduced customers include Du Xiaoman, Didi Chuxing, BYD, Mengjinyuan, Tiantan Assembly, Wanhe Gas, etc.

The Beijing Wangfujing Big Screen was completed to accelerate the cultivation of the second growth curve of the business district screen. On September 19, Zhaoxun Media's latest layout of “Wangfujing Department Store LED Big Screen” was officially unveiled. This is Zhaoxun Media's first large outdoor landmark screen in Beijing. Currently, the company has built a series of naked eye 3D outdoor screens in the six urban business districts of Guangzhou, Taiyuan, Guiyang, Chengdu, Chongqing, and Beijing. The company welcomed the launch of many well-known brands such as Dior, Tiffany, Pepsi, Polestar, Erie, China Insurance, and BAIC, and the “second curve” continued to gain strength.

Downgraded to “Overweight” rating. With the macro recovery, it is expected that the advertising of high-speed rail media advertisers will continue to grow. Considering that restoration is relatively slow and that the business district screen is still in the cultivation and construction stage, which is a slight drag on profits, we lowered the net profit forecast for 23-25 to 1.89/2.42/325 million yuan, corresponding to 29.0/22.5/16.8 times PE, respectively, and downgraded the investment rating to “increased holdings.”

Risk warning: the risk of changes in the macroeconomic situation, the expansion of large outdoor screens falling short of expectations, and the risk of changes in media resource prices.