Event: Company announces 2023 results. In 2023, the company achieved revenue of 17.152 billion yuan, +24.5% year on year; net profit to mother was 307 million yuan, turning a loss into a profit year on year; adjusted EBITDA of 3.73 billion yuan, +59.1% year over year. In '23, the company's four major business segments, Club Med, Sanya Atlantis, Vacation Asset Management Center, and Reunion had a total turnover of 18.125 billion yuan, +18.8% over the same period last year. With the lifting of restrictions on the global pandemic and the release of strong post-pandemic vacation demand, the company's global business fully recovered. In '23, the company's gross profit reached 5.595 billion yuan, +40.2% year-on-year, gross margin reached 32.62% /+3.66pcts, and profitability rebounded steadily.
Club Med: The resort business in various regions performed well and achieved record highs. In 2023, benefiting from European, African, Middle Eastern and Brazilian customers, the mountain business grew dramatically. Club Med's performance reached a record high, achieving a turnover of 15.122 billion yuan/ +19.2%, recovering to 118.3% in the same period in '19; adjusted EBITDA of $3.208 billion, +46.6% over the same period in '22; and recurring operating profit of $1,548 million, +134% over '22. America/Europe, Africa, and the Middle East continued to perform well, with turnover up 62.7%/10.8% from the same period in '19; the Asia-Pacific region experienced a strong rebound after travel restrictions were lifted. Mainland China's turnover was +86.3% year over year, recovering to 101.2% in the same period in '19. In terms of operating conditions, OCC in 2023 was 70.0%/+3.5% year over year, 1.5 pcts difference from 2019; ADR of 1,681 yuan increased by about 8.5%/30.8% compared to 2022/2019, and the company's “upgrade” strategy progressed steadily. In 2023, the company continued to upgrade the resort, successfully launching the Mediterranean Daylight Ark Nanjing Xianlin and Taicang; launched two new high-end resorts, Japan's Kiroro Grand and France's LaRosière Exclusive Collection; completed the sale of the Turkish resort Kemer and the sale and leaseback of the French West Indies resort, and plans to upgrade and refurbish it. Furthermore, Club Med's direct sales ratio reached 72.8%, an increase of 7.4pcts over 2019. The proportion of online booking customers was 29.4%, an increase of 2.9 pcts over the previous year.
Atlantis Sanya: Focus on project construction, revenue growth is impressive. In 2023, Atlantis Sanya achieved a turnover of 1,675 million yuan/ +90.9%; adjusted EBITDA of 745 million/ +157.6%, visits of 6.077,000/ +109%; OCC reached 81.9%/+38.9pcts; ADR reached 2385.5 yuan/ -2.2%, and RevPAR was 1953 yuan/ +86%. The company continues to create new experiential programs, and held the “Pink Night at Water World” in July, then officially launched the Super Summer Vacation Campaign and restarted the Ace Night Club program in the fourth quarter. Fanshow's revenue reached 66 million yuan in '23, an increase of 162.6% over the previous year.
Resort Asset Management Center: The opening performance of new projects is good, and Lijiang resorts continue to recover. Alps Snow World, Club Med Mediterranean Day Ark Taicang Resort, and Alps Time Zone opened in the second half of 2023. As of December 31, 2023, Taicang Alps International Resort has obtained a sales (pre) sale license for approximately 229,275 square meters of construction area and used all of them for sale (pre-sale), with 2,020 units available for sale. As of December 31, 2023, confirmed revenue was RMB3.245 billion. Since opening in November, Taicang Alps International Resort has benefited from increased demand for snow and ice tourism and achieved rapid hill climbing. The passenger flow of Lijiang Mediterranean International Resort recovered well in '23, achieving a turnover of 108 million yuan/ +21.26%, and 192,000 visitors/ +10.35%.
Retreat Club: Focus on improving membership services and experience, and attract significant payment benefits. The company re-positioned TC China as a reunion as the company's global membership operation platform. As of December 31, 2023, the number of members on the Reunion platform reached 6.529,000/ +16.5%. The number of people who paid in '23 reached 114,000, +52.6% year-on-year. In '23, the turnover of the reunion reached 355 million yuan/ +9.0%, and the order volume reached 849,000 orders/ +131.5%.
Investment advice: We expect the company's EPS to be 0.30/0.35/0.42 yuan in 24-26, and the current price corresponding to PE is 11/9/8 times, maintaining the “gain” rating.
Risk warning: demand recovery falls short of expectations; real estate sales fall short of expectations; performance of new projects falls short of expectations; risk of exchange rate fluctuations.