The company released its report for the third quarter of 2023. In the first three quarters, the company achieved a total revenue of 2,053 billion yuan, yoy +647.46%; realized net profit of 14.132,700 yuan; and realized net profit of 102.154 million yuan after deducting non-attributable net profit of 102.154 million yuan, thus reversing losses. Among them, the third quarter achieved revenue of 1,261 billion yuan, yoy +748.28%; realized net profit of 486.556 million yuan; and realized net profit of 46.9932 million yuan after deducting non-return net profit. Under the influence of policy relaxation combined with the peak summer travel season, the company's performance achieved a high increase over the same period last month. We are optimistic that in the future, the company's outbound travel business will fully resume under the influence of factors such as the restoration of international flight capacity, improved visa processing convenience, and reduced consumer travel concerns, etc., to further increase profit levels and maintain an increase in holdings ratings.

Key points to support ratings

The first three quarters turned a loss into a profit, and the fourth quarter may decide whether to make a profit for the whole year. In the first three quarters, the company achieved a total revenue of 2,053 billion yuan, yoy +647.46%; realized net profit of 14.132,700 yuan; and realized net profit of 10.215,400 yuan after deducting non-attributable net profit. In the third quarter, it achieved revenue of 1,261 billion yuan, yoy +748.28%; realized net profit of 486.56 million yuan; and realized net profit of 46.9932 million yuan after deduction of non-return to the mother. The initial recovery of the summer outbound travel market enabled the third quarter to achieve a high year-on-month increase in performance and profit in the first three quarters. The fourth quarter is a low season for traditional tourism, but as the company actively operates winter travel products, the fourth quarter results are expected to drive profitability throughout the year. Furthermore, currently, under the influence of various factors such as the unbalanced relationship between supply and demand, the incomplete return of outbound customers, post-epidemic industry clearance, product innovation and quality improvement, etc., the company's Q3 gross profit margin and net profit margin are performing well, with 11.84%/4.00% respectively, which is better than the Q3 level of 17-19 before the pandemic.

The supply of international flights is picking up, and the full resumption of outbound travel is still hampered by the external environment. According to flight manager data, the number of international flights in the last week (October 23-29) was 7738, recovering to 51.8% of 2019. The recovery of outbound travel business was hampered by the lack of full recovery of air capacity.

According to data from the State Administration of Immigration, the number of people entering and leaving the country in the third quarter was 123 million, yoy +454.4%, reaching 73% of the same period in 2019, of which 61.688 million were mainland residents.

Both international flight capacity and outbound travel demand continued to show a month-on-month recovery trend, and there is plenty of room for improvement in the future.

The Nordic National Tourism Administration visited China for a roadshow, and outbound travel products were launched in the fourth quarter. Recently, tourism departments from Finland, Sweden, Denmark, Norway and other countries visited China for road shows, attracting Chinese tourists. The Beijing-Stockholm route will resume once a day in April next year. Visas for Norway and Sweden can be issued in the Shanghai consular area in about a week, and many tourist destinations are also looking forward to the return of Chinese visitors. On October 20, the Beijing International Cultural Tourism Consumption Fair was held. The company is preparing more than 1,000 travel products to be unveiled at the exhibition. The company has arranged ice and snow products and anti-season products that are in high demand in winter. Ice and snow product destinations include some Nordic countries, and anti-season product destinations include warmer regions such as Australia and New Zealand in the southern hemisphere.

valuations

As a leading outbound travel company, the company is expected to recover rapidly and increase its market share in the context of the rapid recovery of the subsequent outbound travel market and the continued improvement in policy aspects, as the industry continues to clear up in the three years of the epidemic, and the current market supply and demand have not been completely restored, the company is expected to achieve a rapid recovery and increase its market share. Combined with the above, we forecast an EPS of 0.03/0.16 yuan for 23-24, and the corresponding price-earnings ratio of 275.4/44.1 times. Maintain an increase in holdings rating.

The main risks faced by ratings

Risk of uncertainty in inbound and outbound tourism policies, industry recovery falling short of expectations, and market competition risk.