Backed by the Shanghai State-owned Assets Administration Commission, we have invested in high-quality exhibition assets. The Group's exhibition business can be traced back to 1998. In October '20, Lan Sheng Co., Ltd. completed a major asset restructuring and transformed into a listed company with exhibition as its main business. The company has the resources of the entire exhibition industry chain. Its business covers exhibition organization, exhibition hall operation, conference events, exhibition services, etc. It hosts and hosts nearly 30 exhibitions throughout the year, with an exhibition scale of nearly 1 million square meters, serving 1.3 million visitors.
With scarce exhibition hall resources, we have built a whole industry chain for the exhibition industry. The company has the resources of the entire exhibition industry chain. The business mainly covers exhibition organization, exhibition hall operation, conference events, exhibition services, etc.
With its rich experience in organizing exhibitions and sufficient resources, the Convention and Exhibition Group has hosted and hosted many important exhibitions. The company has the right to operate and manage the Shanghai World Expo Exhibition Hall. It is responsible for renting out booths and providing supporting services for the venue, and also hosting large-scale conferences and events.
Stock exhibitions have a strong influence, opening up room for growth incrementally. The company currently has a strong brand. The company has hosted and hosted 4 international exhibition industry association (UFI) certified exhibitions. The Shanghai International Advertising Printing and Packaging Paper Industry Exhibition and the Shanghai International Green Building Materials Fair have won the title of “Shanghai International Brand Exhibition” for many years in a row, and are influential in the industry. The company actively promotes regional replication strategies for core business brands, uses existing IP to expand beyond the province, and creates an endogenous growth curve. In recent years, the company's epitaxial expansion has continued to be implemented. It has successively expanded high-quality exhibitions such as the Dongguan Huizhi Association exhibition and Shanghai Tabus, expanded electronics and consumer industry exhibitions, and opened up room for growth.
Recovery after the epidemic is flexible. Domestic exhibitions have fully recovered since March '23, and the company achieved revenue of 960 million yuan in the first three quarters, an increase of 355.7% over the same period. The exhibition organization is the company's main source of revenue. The exhibition organization business accounts for about 55% of the revenue; the exhibition hall operation business contributes a stable source of revenue to the company, accounting for 10 to 15% of the revenue. During the pandemic, overall gross margin fluctuated greatly due to changes in revenue structure. The company's business fully recovered in '23, and the overall gross margin reached 25.9% in the first three quarters, surpassing pre-pandemic levels. In the first three quarters of '23, expenses improved markedly. The sales expense ratio fell sharply by 13.4 pct to 3.6%, the management fee ratio fell sharply by 28.9 pcts to 11.3%, and the financial expenses ratio fell sharply by 3.6 pct to 1.5%. The net interest rate to mother recovered sharply. In the first three quarters of '23, the net profit margin to mother reached 25.2%.
Domestic exhibitions have fully recovered, mainly by government agencies and foreign investors. In recent years, the country has continuously introduced favorable policies for the development of the exhibition industry. After the special epidemic, various regions introduced favorable exhibition policies one after another.
Affected by the epidemic in 20-22, the national exhibition area and number of exhibitions plummeted, and since March '23, the national exhibition has fully recovered. According to statistics from the Ministry of Commerce, professional pavilions in China held a total of 2,275 exhibitions from January to July, an increase of 19.1% over the same period in 19 years before the epidemic. The exhibition area reached 53.355 million square meters, an increase of 28.7% over the same period in 2019. Domestic exhibitions mainly focus on government agencies and foreign investors. According to the China Exhibition Statistics Report in '19, foreign-funded institutions in China held the largest exhibition area, accounting for 29%; followed by government agencies, accounting for 19%.
Investment advice: Strong recovery in domestic exhibitions led to the company's performance exceeding expectations. The company achieved net profit of 240 million yuan in the first three quarters of 23 years, which significantly reversed losses over the previous year. Net profit of 160 million yuan was deducted from non-return to mother, of which about 110 million yuan contributed to the main business. As a leading domestic exhibition company, we are optimistic about the dominant position of the company's existing exhibitions and the scarce nature of the pavilions. Furthermore, acquisitions and cooperative exhibitions are expected to contribute to the second growth curve. Covered for the first time, a “gain” rating was given.
Risk warning: The impact of macroeconomics on the exhibition industry; the impact of brain drain; the impact of the supply of venue and event resources; the impact of the downturn in financial markets.