Key points of investment:
The company released its 2023 annual report, and the results were in line with market expectations. According to the company's announcement, the company achieved revenue of 9.635 billion yuan in 23, an increase of 50.15% over the previous year. Net profit attributable to mother was 194 million yuan (-334 million yuan in the same period in '22 and 568 million yuan in the same period in '19), and net profit after deducting non-return to mother was 130 million yuan (-418 million yuan for the same period in '22 and $432 million for the same period in '19). In the fourth quarter of a year, the company achieved operating income of 2.9 billion yuan, an increase of 81% over the previous year, a net profit loss of 12.2038 million yuan (-163 million yuan for the same period in '22, +23.34 million yuan for the same period in '19), after deducting a non-net profit loss of 63.19,000 yuan (-234 million yuan for the same period in '22, +10.79 million yuan for the same period in '19).
Passenger flow in Wuzhen recovered to 80% in '19, and the unit price was boosted compared to '19. In '23, the Wuzhen Scenic Area received 7.7207 million visitors, up 568% year on year, recovering to 84% in the same period in '19, achieving revenue of 1,784 billion yuan, up 183.65% year on year, recovering to 82% in the same period in '19, achieving net profit of 284 million yuan, turning a year-on-year loss into a profit. The number of visitors received by Gubei Water Town in '23 was 1,523,600, recovering to 64% of the same period in '19, achieving revenue of 735 million yuan, recovering to 77% of the same period in '19, and achieving net profit of 2.43 million yuan, turning a year-on-year loss into a profit. The passenger unit price in Wuzhen for the year of '23 was about 228 yuan, an increase of 19% over the previous year, and the unit price for Gubei Water Town was about 482 yuan, an increase of 22% over the previous year. Overall, the scenic area business achieved revenue of 1.72 billion yuan in '23, an increase of 262.49% over the previous year, and recovered to 97.87% in the same period in '19. The gross margin was 75.14%, or -6.21pct compared to '19. We believe that compared to 2019, Wuzhen's profit recovery in 23 was mainly due to 1. Reduced government subsidies; 2. Increased discounted costs and financial expenses due to hotel room construction; 3. Increased labor operating costs.
Various business segments have picked up across the board, and profitability has been optimized compared to '19. In '23, tourism products and services achieved revenue of 1,232 billion yuan, a year-on-year increase of 178.99%, and gross margin of 12.95%, +4.78pct compared to '19. Mainly thanks to the company's travel agency business in '23, focusing on segmented tracks such as parent-child travel, research, and health care for young families, and enriching measures such as destination visas+air tickets+hotel products. In '23, the company's integrated marketing services achieved revenue of 2.18 billion yuan, up 108.29% year on year, and recovered to 81.61% in the same period in '19. The gross margin was 21.43%, +1.18pct compared to '19. It is mainly due to the fact that China Youth Expo Federation continues to deepen its original business, accelerate product updates and iterations in the smart exhibition and digital marketing sector, and continuously expand new independent IP businesses.
Investment analysis opinion: As a high-quality ancient town in the country, Wuzhen brings stable and healthy cash flow to the company. The hotel occupancy rate and customer unit price in the scenic area business have high room for growth, the external environment for outbound travel has improved, and the performance of travel agencies and integrated marketing can be expected to be flexible.
We raised our 24-25 profit forecast. We expect the company to achieve net profit of 409/592 million yuan (previous value: 389/571 million yuan) and add a 26-year profit forecast of 751 million yuan, maintaining the “buy” rating.
Risk warning: The recovery of surrounding tourist attractions fell short of expectations, progress of new projects fell short of expectations, etc.