Incident: The company disclosed its 2023 annual report: 1) In 23, the company achieved revenue of 6.762 billion yuan/ +43.8% (same ratio, same below), net profit of 953 million yuan/ -48.6% after deducting non-return net profit of 467 million yuan, turning a significant loss into profit; 2) 23Q4 achieved revenue of 2,225 million yuan/ +27.35%, net profit to mother of 163 million yuan/ +6.75%, after deducting net profit of 165 million yuan over the previous year.
Airport business fully recovered, with many indicators reaching record highs: airport management achieved revenue of 2,045 billion yuan/ +95.8%: the subsidiary controlled and managed 9 airports completed 172,000 flight take-off and landing/ +84.4%, passenger throughput of 25.46 million passengers/ +132%, cargo and mail throughput of 122,000 tons/ +54.7%, respectively, with recovery rates of 111%/109%/102% compared to 19; Among them, Sanya Phoenix Airport achieved record passenger throughput; among them, Sanya Phoenix Airport achieved record highs in passenger throughput. The number of take-off and landing sorties was 135,000 sorties/+82.2%, the passenger throughput was 21.78 million passengers/ +129%, and the cargo and mail throughput was 95,000 tons/ +49.7%, respectively. The recovery compared to 2019 was 109%/108%/95%, respectively. Inbound and outbound passenger traffic has gradually recovered since the second half of the year, but the attractiveness of Hainan as a tourist destination is still impressive, which has strongly contributed to a significant increase in the company's revenue and profitability.
The duty-free business continued to contribute to performance in multiple dimensions. The opening of the new area at Phoenix Airport: 1) In '23, the company achieved revenue of 268 million yuan/ -0.6% (financial caliber affected the apparent growth rate), of which China Free Sun Moon Store and Haikong Duty Free City had site rental revenue of 99 million yuan/ +9%; 2) Sanya Airport Phase II duty-free shop successfully opened, and the duty-free commercial business area increased to about 6,000 square meters. The site rental revenue of the Sanya Airport store was 159 million yuan/ +10% leasing, and duty-free pick-up point revenue of 66 million yuan/ +5%, all included in airport management Revenue; 3 ) The tax exemption achieved investment income of 82 million yuan/ +58%, of which Haikou/Sanya Airport Duty Free Shop was 0.67 million yuan, respectively, and the net interest rate of the two airport duty-free shops was 4.8%/2.6%, respectively.
Accelerate the elimination of real estate and focus on high-quality core businesses. 1) In '23, the company overcame the impact of the market downturn, and the real estate business achieved revenue of 3.05 billion yuan/ +44.9%, accounting for 44.4%. The real estate sales project had a contract area of 122,300 square meters/ +40%, and signed sales of 2,009 million yuan/ +38%. In addition, the company is actively cultivating and building new business in the airport industry. The first phase of the project covers an area of about 276 acres. 2) The company actively expands high-quality large-scale projects with rapid return of capital, such as the Rinkong Lingang Industrial Park, government enterprises and institutions, and residential commercial office buildings. The property management business achieved revenue of 694 million yuan/ -2.6%, and the annual management project area increased by more than 1 million square meters. 3) Other businesses achieved revenue of 750 million yuan/ +25%, mainly in hotel operations and the Tianyu Flying Training business. Among them, the 5 self-operated and commissioned hotels had an average OCC of 60.27%.
With the rapid recovery of the airport business and the settlement of debts, profitability is back on track. 1) In '23, the company achieved a gross profit margin of 48.9% /+14pct, with a gross profit margin of 42.54% /+40.55pct for the airport business; 2) The cost ratio was drastically reduced, the sales rate was 3.01% /-0.37pct, the management rate was 11.58% /-3.58pct, the financial rate was 7.35% /-5.33pct, and the absolute amount of financial expenses was -16.6%; 3) Net profit to mother was 14.09% /-25.3pct, mainly due to the deduction of 2 billion yuan for deduction of land concessions and related expenses in '22 The net profit margin for non-return mother was 6.91% /+17.47pct, which was a significant improvement.
Profit forecast and investment advice: As an important participant in the construction of the Hainan Free Trade Port, we expect to enjoy policy and development dividends, and are optimistic about the medium- to long-term growth of the airport and duty-free business. We are optimistic about the short, medium and long-term development of the company. We expect net profit to be 11.7/13.4/1.56 billion yuan in 24-26 years, respectively, and the PE corresponding to the closing price on April 18 will be 33/29/25X, respectively. We selected Shanghai Airport, Baiyun Airport, and Shenzhen Airport as comparable companies. The average PE value of comparable companies in 2024 was 26 times, and the investment rating was adjusted to an “gain” rating.
Risk factors: Customer flow falls short of expectations, capacity expansion falls short of expectations, duty-free sales fall short of expectations, policy risks, etc.