In 23Q3, the company achieved operating income of 910 million yuan (+25.9% year-on-year), net profit of 95 million yuan (+11.0% year-on-year), and revenue and profit continued to recover. The company benefits from the rapid development of the domestic offline cultural market. Based on the competitive advantages established by the company's “integration+brand”, the leading position in the industry is expected to be further consolidated. In addition, the company's use of AR/VR, AIGC and other technologies to expand immersive experiences is expected to bring new growth opportunities.
Maintain the company's “increase holdings” rating.
Project completion increased, and revenue and profit continued to recover. 23Q3 The company achieved revenue of 910 million yuan (+25.9% yoy) and a gross profit ratio of 25.7% (y-4.2pcts); sales/management/R&D expenses ratio of 4.0%/3.0%/2.5% (y-0.5/-1.1/+0.5pct); and realized net profit of 95 million yuan (+11.0% yoy), corresponding net profit margin of 10.4% (y-1.4pcts year-on-year). Among them, based on the principle of prudent accounting, 23Q3 companies calculated asset impairment and prepared 57 million yuan. As offline experiential activities returned to normal, demand for cultural tourism consumption continued to be released, and 23Q3 company performance showed a continuous recovery trend.
Key projects have successively won bids, and the recovery trend is expected to continue. According to the company's announcement, from July to August 2023, the company successively won several projects such as the Yellow River Suspension River Cultural Exhibition Garden exhibition project and the Hangzhou Asian Games Museum space software service, etc., with a total new order amount of about 450 million yuan. In October 2023, the company successively won the bid for the National Cultural Power Pavilion project in Nankang District of Ganzhou City and the Ordos Science and Technology Innovation Hall project, with a total bid amount of about 399 million yuan. The company will continue to take advantage of the advantages of using digital technology such as VR/AR and holographic images to create an immersive experience, further strengthening the brand effect. With the smooth signing and delivery of orders, the company's performance recovery is expected to continue.
The innovation business is progressing smoothly, and technology empowers new scenarios of cultural tourism. Combining its own business resources and advantages in technology application fields such as naked eye 3D and AIGC, the company actively explores innovative businesses such as 3D digital content, immersive VR cultural tourism, and exhibition operations. According to the company's official WeChat account, 23Q3 has successively used digital technology to custom-develop new digital content for the Hunan Travel Fair, participated in the Shanghai Urban Space Art Season project to build the West Coast White Cat main exhibition hall, and build an immersive creative city network for the 2023 World Design Capital Conference, etc., fully demonstrating the company's strength in cultural digitization and scene creation. With business expansion in diversified scenarios, the second growth curve is expected to be released at an accelerated pace.
Risk factors: Macroeconomic growth is under pressure; government orders are limited by fiscal revenue, and there is a risk that construction of urban exhibition halls, science and technology museums, park management and museums will slow down; new business development falls short of anticipated risks.
Investment advice: The company benefits from the rapid development of the domestic offline cultural market. Based on the competitive advantages established by the company's “integration+brand”, the leading position in the industry is expected to continue to strengthen. In addition, the company uses AR/VR, AIGC and other technologies to expand immersive experiences, which is expected to bring new growth opportunities. We maintain the 2023-2025E revenue forecast at 23.63/28.42/3169 billion yuan; considering the company's current accounts receivable repayment uncertainty, we slightly adjusted the 2023-2025E net profit forecast to 3.09/4.13/478 million yuan (previous forecast value was 3.32/4.17/481 million yuan), and the current stock price corresponds to 2023-2025 PE 23/17/15x. We expect the company to recover to a stable profit level in 2024. Referring to the company's valuation center for the past 3 years, about 22 times PE (wind unanimous expectations), we gave the company 22 times PE in 2024, corresponding to the target price of 15 yuan, and maintain the “increased holdings” rating.