Incident: Lan Sheng Co., Ltd. announced its 23-year performance forecast. It is expected to achieve net profit of about 275 million yuan, an increase of 140.16%; it is expected to achieve net profit without deduction of 225 million yuan, an increase of 63.20% over the same period. 23Q4 is expected to achieve net profit of 0.3 million yuan, a decrease of 72.95%; net profit without return to mother is expected to be 63 million yuan, a decrease of 45.76%.

Comment:

The main business has recovered well. With the recovery of the exhibition industry, the company's exhibition and event business fully recovered, and all main business indicators were better than in the same period in '22. The two-wheel drive strategy of endogenous development and epitaxial mergers and acquisitions progressed steadily. The 2nd Chengdu International Industry Fair (“Chengdu Industrial Fair”) was successfully held in April '23, and part of the shares in Shanghai Tabus Exhibition was acquired in September '23.

Q4 Non-recurring profit and loss are a drag. The non-recurring profit and loss in 23 years was mainly due to the receipt of investment allocations from the Shanghai Huaduo Equity Investment Fund Partnership (Limited Partnership) and compensation from the Shanghai Wentai Sneaker Factory building expropriation. Non-recurring profit and loss for the first three quarters of '23 was $81 million, but it is expected to be $50 million for the full year of '23. Affected by fluctuations in the secondary market, 23Q4 non-recurring profit and loss dragged down the performance by about 0.3 billion yuan.

Investment advice: Domestic exhibitions are recovering strongly, but slightly hampered by Q4 investment revenue. The company expects to achieve net profit of 275 million yuan to mother in '23. 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. We expect EPS to be 0.52/0.56/0.68 yuan/share from 2023 to 25, and the current stock price corresponds to PE at 17x/16x/13x, maintaining an “overbearing” rating.

Risk warning: The performance forecast is a preliminary estimate. The specific financial data is subject to the annual report.

Due to the macroeconomic impact on the exhibition industry, booth sales fell short of expectations.