Incident: Dalian Shengya released its 2023 three-quarter report. The company achieved operating income of 397 million yuan in the first three quarters of 2023, an increase of 179.10% over the previous year; achieved net profit of 110 million yuan after deduction, realized net profit of 110 million yuan after deduction, turned a year-on-year loss into a profit; and a net cash flow of 197 million yuan from operating activities, an increase of 320.85% over the previous year. Among them, in the third quarter of a year, the company achieved revenue of 214 million yuan, an increase of 127.22%; realized net profit of 0.91 billion yuan, an increase of 382.04%; and realized net profit of 90 million yuan after deduction, an increase of 418% over the previous year.

The quality upgrade of existing projects has been widely praised by visitors: Harbin Polar Park innovatively launched the Glacier Show and the country's first penguin show, and fully optimized and upgraded the original five major themed shows, which have truly achieved five major venues and seven major theme shows, enhancing the visitors' experience and sense of acquisition; as the first polar bear themed hotel in the country, the Harbin Polar Bear Hotel has continued to be popular with tourists since its opening, and won No. 1 in the Ctrip 2022 Harbin Family Paradise Hotel List. The company uses new technology and digital construction such as smart tourism to inject momentum into the refined management of scenic spots, add and upgrade smart equipment and software systems for scenic spots according to business needs, improve operational efficiency and information management capabilities, and provide visitors with a more intelligent and convenient play experience; the company attaches importance to visitors' experiences and evaluations, responds and processes negative feedback from visitors in a timely manner, and establishes self-inspection and verification - rectification feedback - optimization and improvement working mechanisms to effectively improve tourist satisfaction and service levels; The company regularly conducts training on management practices, daily operations, safety management and emergency response to improve scenic spot services. Professionalism provides visitors with friendlier and more efficient travel services and a more comprehensive and high-quality travel experience, and enhances public recognition and tourist stickiness.

Focusing on IP strategy, original IP and co-branded IP complement each other: the company cooperated with world-renowned IP Minions to host the “Despicable Me” special exhibition. The exhibition opened in August 2023 and is located in the iconic Xinghai Plaza in Dalian. The geographical customer base advantage is remarkable. Combined with the traffic attraction of Minions IP itself, it may leverage incremental performance. The company has deepened the construction and operation of the original IP system. The “Panther Group” and “Panther Family” IPs developed have spawned 100 cultural and creative products, created the IP-themed store “Seal Post Office”, and the three major influencer shopping spots “Baofu,” “Baomei,” and “Bao Slim” to simultaneously lay out consumer fields and content such as IP-themed restaurants to empower the company's main business. In the first half of this year, the IP debuted at the LICENSING EXPO 2023 Global IP Licensing Exhibition (Shanghai), showcasing the company's IP image to the world and strengthening brand awareness and influence.

The company actively promotes offsite projects and lays out new project increments: the company accelerates the construction progress of the Yingkou Shengya Coastal City project in an orderly manner and promotes the completion and operation of the project as soon as possible under the premise of ensuring quality and safety; the company management always maintains close contact and communication with the parties involved in the Zhenjiang project to actively discuss plans to resume work and resume production to make phased progress in the resumption of work and construction; the company's management actively discusses, communicates, and negotiates Chun'an project revitalization matters, and studies countermeasures to overcome existing difficulties and protect the assets and interests of listed companies.

The profit margin level reached a new high since 2016, and the return on invested capital was impressive: 2023Q3, the company's gross sales margin and net profit margin of 67.85%/36.34%, all of which reached new highs since 2016; previously, gross margin peaked at 65.02% in 2018, and net interest rate peaked at 15.22% in 2017. The company's return on invested capital in the first three quarters of 2023 was 8.56%, exceeding 7.97% in 2017.

The company's profit forecast and valuation: The company is expected to achieve operating income of 522.62/684.22/80,648 billion yuan in 2023/2024/2025, respectively, up 232.43%/30.92%/17.87% year-on-year; realized net profit to mother was 111,72/156.49/18.342 billion yuan, respectively; corresponding EPS was 0.87/1.21/1.42 yuan, and the corresponding PE was 18.90/13.49/11.51 times. Companies with high business comparability were selected based on Shenwan's second-tier industry, namely Tianmu Lake, Songcheng Performing Arts, China Youth Travel, and Qujiang Cultural Tourism. With Huashun ifind, they unanimously predicted that the average PE valuation value of comparable companies in 2023-2025 would be 34/23/19 times. The current valuation level of Dalian Shengya is still low, so it maintains an “increase in weight” rating.

Risk warning: The risk of insufficient overall travel consumption, the risk of project expansion falling short of expectations, and industry competition exacerbates the risk.