The company released its 2023 three-quarter report on October 31. 3Q23 achieved revenue of 2,556 billion yuan, up 30.96% year on year; net profit to mother of 100 million yuan, up 194.44% year on year; net profit after deducting non-return to mother was 93 million yuan, up 200.90% year on year. 1-3Q23 achieved revenue of 6.734 billion yuan, a year-on-year increase of 39.88%; net profit to mother of 206 million yuan, reversing year-on-year losses; net profit after deducting non-attributable net profit of 193 million yuan, reversing year-on-year losses. 3Q23 diluted EPS of 0.14 yuan, weighted average return on net assets of 1.63%.

Brief review and investment advice.

1. 3Q23 revenue increased 30.96% year on year to 2,556 billion yuan, net profit to mother increased 194.44% year on year to 100 million yuan, and gross margin increased 9.78 pct year on year to 27.31% year on year. The company's 1Q, 2Q and 3Q revenue were $1,658 million (+20.00%), $2,521 million (+70.20%), and $2,556 million (+30.96%); net profit to mother was -05 billion yuan (+95.72%), $111 million (year-on-year reversal), and $100 million (+194.44%), respectively. 3Q23 revenue recovered to 69.23% in '19, net profit to mother recovered to 61.32% in '19, and gross margin increased by 3.92pct compared to '19. 1-3Q23 revenue increased 39.88% year over year to 6.734 billion yuan, recovering to 70.56% in 2019; net profit to mother reversed the year-on-year loss to 206 million yuan, recovering to 37.85% in 2019; gross margin increased 11.16 pct to 25.94% year on year, up 1.58 pct from year 19.

2. The cost rate decreased by 1.14 pct year-on-year during the 3Q23 period. The cost rate decreased by 1.14pct year-on-year to 18.09% during the 3Q23 period, an increase of 1.63pct over 2019. Among them, the sales expense ratio increased 0.13 pct to 8.53% year over year, 1.21 pct; the management cost ratio decreased 0.67 pct to 6.74% year on year, up 0.89 pct from year 19; R&D cost ratio increased 0.02 pct to 0.10% year on year, down 0.10 pct from year 19; and financial cost ratio decreased 0.62 pct to 2.72% year on year, up 2.05 pct from year 19. The cost rate during 1-3Q23 decreased by 2.81 pct to 18.68% year on year, up 2.08 pct from year 19; management fee ratio decreased by 1.03 pct to 7.32% year on year, up 2.10 pct from year 19.

3. Passenger flow in scenic spots has been gradually restored, and per capita consumption has exceeded the same period in '19. ① Scenic area business: Wuzhen Scenic Area 1-3Q23 received 6.1587 million visitors, of which Dongzha Scenic Area received 1,827,500 visitors and Xizha Scenic Area received 4.3312 million visitors, recovering to 84.31% of 1-3Q19, with a per capita consumption of 224.89 yuan, an increase of 19.91% over 1-3Q19; Gubei Water Town Scenic Area received 1.1207 million visitors, recovering to 58.57% of 1-3Q19, with per capita consumption of 487.20 yuan, up 24.63% from 1-3Q19. ② Integrated marketing business: China Youth Expo Federation achieved revenue of 1.4 billion yuan in the first three quarters of 2023, of which the third quarter achieved revenue of 505 million yuan. ③ Travel agency business: The company has taken many measures, and the business performance of the travel agency business segment is showing a positive trend. ④ Hotel business: Shanshui Hotel achieved operating income of 319 million yuan in 1-3Q23, and the net profit loss margin narrowed sharply. In 3Q23, revenue of 120 million yuan was achieved, and net profit was achieved.

4. China Youth Travel Service Golden Week in Multiple Scenes and Multiple Business Formats. From September 29 to October 6, the Mid-Autumn Festival National Day “Super Golden Week” ① Wuzhen Scenic Area: received more than 410,000 visitors during the holiday season, an increase of 254.71% over the same period last year; achieved a year-on-year increase of 143.83% in revenue, up 8.46% from the same period in 2019; the hotel occupancy rate increased 13.02% over the same period last year; and average guest consumption increased 29.86% compared to 2019. Combining seasonal characteristics, the Wuzhen Scenic Area launched a Mid-Autumn Festival event with the theme “Wuzhen, the Moon Came Out”, compounding the popularity of the Wuzhen Drama Festival, so that visitors from all over the country can enjoy the unique charm of water town culture while enjoying the holiday season. ② Gubei Water Town Scenic Area: It received 180,000 visitors during the holidays, an increase of 16.14% over the previous year; average guest consumption increased 25.25% compared to 2019; the hotel occupancy rate was full for six consecutive days, making it the best record in history. ③ China Youth Travel Landscape Hotel: Through various promotions such as the Mid-Autumn Festival National Day promotion, early reservation, and consecutive stay offers, etc., revenue increased 64.55% over the same period last year and 13.67% over 2019; hotel occupancy rate increased 13.25% year over year; RevPAR increased 70.97% year on year; average room price increased 41.69% year on year, up 19.29% year on year. China Youth Travel actively seizes the “golden tier” of tourism. Its rich business formats provide visitors with diverse experiences and help the deep integration of culture and tourism.

Profit forecast. We believe that with the recovery of passenger flow, the company's business is expected to continue to recover. The company's revenue is expected to be 9.453 billion yuan, 11.68 billion yuan and 14.063 billion yuan respectively in 2023-25, up 47.3%, 23.6%, and 20.4% year-on-year; net profit to the mother is estimated to be 3.11, 4.79, and 605 million yuan, respectively, +193.2%, +26.1%, and corresponding EPS is 0.43 yuan, 0.66 yuan, and 0.84 yuan respectively. The company's two major scenic spots can be expected to recover. Combined with comparable company valuations, PE was given 18-22 times in 24 years, corresponding to a reasonable value range of 11.88-14.52 yuan/share, maintaining a “superior to the market” rating.

Risk warning. New projects fall short of expectations; risk of market competition; risk of consumer spending power recovery falling short of expectations.