Key points of investment:
The company released its 2023 annual report on April 2. In 2023, we achieved revenue of 9.63 billion yuan, an increase of 50.2% year on year; net profit to mother was 190 million yuan, up 158.2% year on year, turning a significant loss into profit. The diluted EPS was 0.3 yuan; the weighted average return on net assets was 3.17%. 2023 dividend plan: A cash dividend of 0.85 yuan (tax included) will be distributed to all shareholders for every 10 shares.
Brief review and investment advice.
The revenue for 4Q23 was 2.9 billion yuan, and the net profit returned to the mother in '23 exceeded the previous forecast. The company achieved revenue of 9.63 billion yuan in 2023, up 50.2% year on year, down 31.4% from year 19, gross margin of 24.5%, up 8.4 pct year on year, and net profit of 190 million yuan (net profit to mother of 180 million yuan in previous performance forecasts), turning a significant year-on-year loss into profit. The increase in performance was mainly due to the rapid recovery of the domestic travel market in 2023, and the company's overall business showed a positive recovery trend. 4Q23 achieved revenue of 2.9 billion yuan, up 81.0% year on year, down 35.7% from the same period in '19, gross margin was 21.0%, up 1.3 pct year on year, and net profit to mother was -12 billion yuan (4Q22 loss of 163 million yuan).
The revenue and passenger flow of scenic spots continued to recover year on year, and there is still a certain gap compared to '19. ① In 2023, Wuzhen Scenic Area's revenue was 1.78 billion yuan, up 183.7% year on year, down 18.1% from 2019, and net profit was 280 million yuan. A total of 7.72 million visitors were received, down 15.9% from 2019, of which Dongzha received 2.27 million visitors, down 41.5% from '19, and Xizha received 5.45 million visitors, up 2.8% from '19; ② In 2023, Gubei Water Town's revenue was 740 million yuan, up 6.78% year on year, down 22.6% from '19. It received 1.52 million visitors, up 34.9% year on year, down 36.3% from '19.
The performance of various business segments improved across the board, and the gross margin of the hotel business improved markedly. ① Integrated marketing service revenue in 2023 was 2.18 billion yuan, up 108.3% year on year, gross profit margin was 21.4% year on year, down 5.7 pct year on year; ② Tourism product service business revenue in 2023 was 1.23 billion yuan, up 179.0% year on year, gross profit margin was 13.0% year on year, down 11.7 pct year on year; ③ Hotel business revenue in 2023 was 40 billion yuan, up 28.8% year on year, gross profit margin 27.3% year on year, up 16.2 pct year on year.
The cost rate for the 4Q23 period was 21.9%, a year-on-year decrease of 10.2pct. Among them, sales expenses were 330 million yuan, up 57.6% year on year; sales expense ratio was 11.4%, down 1.7 pct year on year; management expenses were 270 million yuan, up 2.5% year on year; management expenses were 9.2%, down 7.0 pct year on year; financial expenses were 40 million yuan, up 1.9% year on year, and financial expenses ratio was 1.3%, down 1.0 pct year on year.
The business is booming, and cultural tourism projects continue to expand. In '23, Wuzhen successfully hosted the 10th Wuzhen Theatre Festival, which included more than 2,000 ancient town carnival performances, forming a unique cultural moat; Gubei Water Town polished the Great Wall in '23 and launched a series of events, while further strengthening marketing and launching the Beijing-Tianjin-Hebei Card to drive off-season traffic. In 23 years, the company has continued to follow cultural tourism projects such as Xianyang Qin Cultural City to empower local cultural tourism development. The company's scenic area business restoration+cultural tourism project expansion is worth looking forward to. We believe that with the continued release of travel intentions and the opening up of overseas travel policies, the company's travel agency business is expected to further increase revenue.
Profit forecast. The company's net profit for 2024-2026 is estimated to be 447, 565, and 597 million yuan, respectively, up 130.4%, 26.4%, and 5.7% year-on-year; corresponding to EPS of 0.62, 0.78, and 0.83 yuan, respectively. I am optimistic about the continued recovery of business in the two towns and the recovery of outbound travel business. Combined with comparable company valuations, the company will be given 20-24 times PE in 2024, corresponding to a reasonable value range of 12.40 yuan to 14.88 yuan/share, maintaining a “superior to the market” rating.
Risk warning. Macroeconomic downside risks; market competition exacerbates risks; risks where the recovery of consumer spending power falls short of expectations.