Core views

The company's successful performance in 2023 reversed losses, and both revenue and performance increased significantly compared to the same period in 2019.

Passenger flow was slightly under pressure during 24Q1 due to weather and other factors, but it is expected that it will gradually return to normal during the year. In 2023, the company promoted transformation and development, including the construction and operation of Wenzong Ancient Village, the construction and operation of the Grand Jiuhua Hotel business building renovation project, the transportation conversion center function improvement project, and preliminary work on the Lion Peak Scenic Area comprehensive development project. The Chihuang High Speed Rail is expected to operate during the year to further enhance transportation convenience. The company announced its investment in the Lion Peak Scenic Area passenger ropeway project, which is expected to continue to increase passenger flow and enhance synergy effects after completion.

occurrences

The company released its 2023 annual report and 2024 quarterly report. In 2023, we achieved operating income of 724 million yuan, +117.94% year over year, and realized net profit of 175 million yuan, compared with -136.994 million yuan in the same period last year, to reverse losses; in the first quarter of 2024, we achieved revenue of 180 million yuan, -6.13% year over year, and realized net profit of 52.0815 million yuan, or -15.80% year over year.

Brief review

The 2023 results reversed losses, and multiple projects promoted transformation and development. The 23Q4 single-quarter company achieved revenue of 162 million yuan, +116.22% over the same period last year. Net profit of 23Q4 alone was 22.86 million yuan, and 22Q4 was -14.69 million yuan. 23Q4 gross margin was 44.72%, +25.75pct year over year. The gross profit margin for the full year of 2023 was 49.62%, +23.18pct. On the cost side, the 2023 sales expense ratio was 5.36%, -1.85pct year-on-year.

Management fee rate 13.00%, -8.07pct year-on-year. Financial expense ratio -0.18%, +0.06pct year-on-year. The overall cost rate for the period was 18.18%, -9.86% year-on-year, and the fee reduction was significant; on the core business side in 2023, the ropeway cable+hotel business accounted for 73.7% of tourism service revenue, -3.0 pct year on year. By business, the gross profit margin of the ropeway and cable car business was 85.96%, +3.18pct compared to the same period in 2019. The gross profit margin of the hotel business was 16.46%, up from 5.91% in the same period in 2019. The gross profit margin of the passenger transport business was 48.55%, up from +0.03pct in the same period in 2019; on the balance side, the balance of accounts payable was 192 million yuan, up from +119.97% at the end of the previous period, an increase in the company's unpaid project payments. The balance of projects under construction was 190 million yuan, +25.2% compared to the beginning of the period, mainly transportation conversion center projects; 24Q1 gross profit margin was 54.68% in a single quarter, -3.27% year-on-year. The sales expense ratio was 4.16%, +0.06pct year-on-year. Management fee rate 11.45%, +0.26pct year-on-year. The pressure on the company's revenue and performance in the first quarter is expected to be mainly affected by the wrong Spring Festival period and a week of snow and the closure of the mountain. Passenger flow is expected to gradually normalize. In 2023, the company promoted transformation and development. One was to complete the construction of the Wenzong Ancient Village project and put into operation; the second was to complete the construction and put into operation of the Jiuhua Hotel business building renovation project to build a city meeting room; the third was the Jiuhuashan Transportation Conversion Center function improvement project. The main functional area was completed and initially put into use during the 2024 Spring Festival. 5207 vehicles can be parked to meet the needs of visitors over 5,000 people/hour during the peak period; the fourth is to advance the preliminary work of the comprehensive development project of Lion Peak Scenic Area in an orderly manner; the fifth is to advance the preliminary work of the comprehensive development project of Lion Peak Scenic Area. Plan enterprise strategy development and actively prepare project reserves. The Chihuang High Speed Rail is expected to be opened within the year to boost transportation convenience, and passenger traffic appeal to central China is expected to increase.

Invest in the Shizifeng Scenic Area passenger ropeway project and continue to release growth

The company announced that it plans to invest abroad in the Jiuhuashan Lion Peak Scenic Area passenger ropeway project, with an estimated investment amount of 326 million yuan. The total planned land area is 17,690 square meters: of these, the land area for the ropeway station and its ancillary facilities is 15,326 square meters. The horizontal length of the alpine sightseeing trail is about 3047 meters, the actual length of the route (including slopes) is about 3,415 meters, and the width is controlled at 1 to 2.5 meters. The construction period of the project is 24 months. The ropeway ride rate is based on 40% of the estimated number of visitors to the Lion Peak Scenic Area. The number of passengers in the first year of construction of the ropeway is expected to be 224,000, and is expected to increase by 15% every year thereafter, and will not increase in the 15th year. Losses are expected for the first three years of operation, and profits will begin in the fourth year. Over the 15-year period, the average annual revenue was 111.475 million yuan, the total average profit margin was 49.69 million yuan, the return on investment was 15.32%, the internal return on the total investment (after tax) was 9.54%, and the total payback period (after tax) was 11.92 years (including 2 years of construction). It is expected that the project will effectively handle the gradual increase in passenger flow, and better collaborate with surrounding tourism projects to implement the specific measures of the provincial committee and provincial government's strategic plan for “the construction of a world-class leisure, vacation and health tourism destination in Dahuangshan”, and continue to bring in growth.

Investment advice: It is predicted that the company will achieve net profit of 200 million yuan, 220 million yuan, and 234 million yuan from 2024 to 2026. The current stock price corresponds to PE of 21X, 19X, and 18X, respectively, maintaining an “increase in holdings” rating.