occurrences
On March 14, 2024, the company announced 2023 results, revenue of 17.15 billion yuan/ +24.5%, net profit of 310 million yuan and loss; adjusted EBITDA of 3.73 billion yuan/ +59.1%, adjusted EBITDA rate of 21.7% /+4.7pct.
reviews
Tourism operations have fully resumed and surpassed 19 years, and dependence on real estate sales has declined further.
The company's tourism operating turnover in '23 was 18.13 billion yuan/ +18.8%, +27.9% compared to '19, and the business fully recovered and surpassed that of '19. Segmented revenue, Club Med and others/Sanya Atlantis/Vacation Asset Management Center/ Retreat Club and related businesses were 141.6/1.06 billion yuan, +22.3%/-5.6%/-2.6%, respectively. Of this, real estate sales revenue was 9.3 billion yuan, accounting for 5.4% /-2.2pct of total revenue, and 14.4pct compared to '19. Reliance on the real estate business has declined significantly from '19. In terms of profitability, Club Med and others/Sanya Atlantis/Vacation Asset Management Center/Retreat and related businesses had gross margins of 29.0%/50.0%/48.0%/64.1%, year-on-year, +1.8/+17.7/+7.1/-1.9pct, operating profit of 15.5/5.1/1.6/-0.99 billion yuan, corresponding operating profit margin 10.9%/29.0%/14.7%/-56.4%, +5.2/+21.9/-10.1/+73.3pct; of these, Club Med and Sanya Yate both benefited from a significant improvement on the revenue side as demand recovered. The decline in profit margins at the Vacation Asset Management Center was mainly due to a year-on-year decline in real estate sales. The Taicang project incurred start-up fees in the early stages of operation, and the refocusing of repositioning and related businesses reduced losses.
Cash flow is good, debt levels have declined slightly, and debt repayment pressure is manageable. Net cash flow from the company's operating activities in '23 was RMB4.04 billion/+80.2%. Net debt as of the end of the year (excluding leasing liabilities) was $8.7 billion, a year-on-year decrease of about $300 million, cash and bank balances of $2.69 billion, unspent bank financing of $2.67 billion, and liabilities to be repaid within the next year of $3.56 billion. At present, the peak capital expenditure period for the company's Taicang project has passed. The tourism operation business has a strong ability to generate cash flow. It is expected that debt repayment pressure will be manageable, and the leverage ratio is expected to be further reduced.
We believe that the main highlights of the company in '24 are: 1) the Taicang project benefited from the domestic ice and snow boom and the demand of high-end customers in the Yangtze River Delta climbed rapidly; 2) Club Med upgraded and expanded, opening a total of 4 new resorts in China+France in 24; 3) the share of housing revenue in Sanya increased, and the company continued to introduce new restaurants and retail brands.
Profit Forecasts, Valuations, and Ratings
The world's leading high-end vacation business has fully recovered, and new projects such as Taicang have plenty of highlights. The net profit from 24E to 26E is estimated to be 3.5/50/ 630 million yuan, corresponding to PE valuation of 13.5/9.4/7.5 times, maintaining the “buy” rating.
Risk warning
Taicang's operations fell short of expectations, real estate sales fell short of expectations, risk of overseas recession, and risk of exchange rate fluctuations.