Introduction to this report:

Benefiting from the popularity of domestic snow and ice tours, the company's Club Med, Sanya Atlantis, and Taicang projects had impressive operating data during the New Year's Day holiday. Considering that the Taicang project was still climbing in the early stages of construction, it put a certain amount of cost pressure on the short term.

Summary:

The investment proposal lowered the 2023H2 real estate market under pressure and the opening of the Taicang project later than expected, to lower the company's 2023-2025 net profit forecast to 2.33 (-51%) /3.92 (-46%) /5.45 (-43%) billion yuan. Considering that the industry average PE valuation was 20x, the company was given 26x PE, which was higher than the industry average in 2024, and the target price was lowered to HK$9.11 (-25%) to increase its holdings.

The Taicang project opened in early November, and the ice and snow resort's operating data is impressive. ① Taicang Alps International Resort has the largest indoor ski resort in East China. The average daily passenger traffic of Alps Snow World reached 3,000 during the New Year's Day holiday, and the average number of visitors on weekdays reached about 1,500 since December; ② However, the Taicang project was asset-heavy and opened later than expected, putting short-term cost pressure on the slopes; ③ The rest of the company's ice and snow resorts benefited from high tourism popularity. The three ice and snow resorts under the company's Beidahu/Yabuli/Changbaishan reached an average occupancy rate of over 95% from December 29-31, Nanjing. Anji/Yanqing Four resorts were close to or reached full capacity on December 30-31.

Cub Med and Atlantis Sanya also improved marginally during New Year's Day. ① According to a comparable scale, the total turnover of Club Med Mediterranean Club Resort in China exceeded the 2023 New Year's Day holiday by about 154%, and the average occupancy rate reached 85%; ② From December 30, 2023 to January 1, 2024, the turnover of Atlantis Sanya exceeded the same period of about 12% in the same period of 2023 and more than 12% in the same period of 2019, which is the highest turnover during the New Year's Day holiday since opening, with an average occupancy rate of 94%.

Demand from the middle and high-end is resilient, and overseas recovery is more flexible. ① Judging from 23H1 data, Club Med Europe, Africa, Middle East/America/Asia Pacific's turnover recovered to 113%/165%/93% in the same period in 2019, and customer unit prices recovered to 125%/142%/84% respectively, recovering significantly; ② Sanya Atlantis/Vacation Asset Management Center/Retreat and related business revenue achieved 85%/72%/-12% year-on-year growth. Among them, Atlantis's turnover was also driven by volume (OCC +40pct year over year), and the middle and high-end consumption remained sticky, focusing on Sanya's peak consumer season operation. Data trends.

Risk warning: repeated epidemic, increased market competition, obvious decline in the same store, etc.