Performance summary: In 2023, the company achieved revenue of 6.762 billion yuan/yoy +43.84%, net profit of 953 million yuan/yoy -48.57%, net profit after deducting non-return to mother of 467 million yuan/yoy +194.17%; 23Q4 achieved operating income of 2,225 million yuan/yoy +27.35%, net profit due to mother was 163 million yuan/yoy +6.75%, net profit after non-return to mother was -165 million yuan/yoy +6.75%; overall business was in line with expectations.
The company's revenue growth in 23 was mainly due to the year-on-year increase in revenue in the airport and hotel business due to improved market conditions. In addition, the company's real estate business increased sales, and project carryover led to an increase in revenue; the decline in the company's net profit to mother in '23 was mainly due to 2 billion yuan of land transfer funds in 2022, which included non-financial profit and loss, resulting in a high overall net profit return to mother in 2022.
The recovery in passenger flow is improving, leading to a rapid recovery in airport business. In 2023, the company's airport travel throughput and flight take-off and landing times all surpassed 2019. The annual passenger throughput was 25,4599 million/ recovered to 109% in 2019, and the number of take-offs and landings was 17,2039, returning to 111% in 2019. Of these, the passenger throughput of Sanya Phoenix Airport was 21.7758 million/ recovered to 108% in 2019, and the number of take-offs and landings was 13,4716, returning to 109% in 2019. Passenger flow recovered, and the company's airport business grew rapidly. Annual revenue reached 2,045 billion yuan/yoy +96%, up 14% from 2019. The increase in revenue showed the company's scale effect. The gross margin of the airport business in 2023 was 42.54%/up 3.5 pcts compared to 2019.
The French garden project has been implemented, and the duty-free area has been expanded, which is expected to benefit from the development dividends of the free trade port. In 2023, the company's duty-free and commercial business achieved revenue of 268 million yuan. Of these, Haidao Commercial achieved revenue of 99 million yuan by providing duty-free shop space leasing to China Free Haikou Riyue Plaza Duty Free Shop and Haikou Global Boutique (Haikou) Duty Free; Haidao Commercial achieved investment income of 67 million yuan by participating in Haikou Meilan Airport Duty Free Shop. In addition, the Sanya Phoenix Airport Duty Free Shop Phase II French Garden Project officially opened in September 2023, increasing the operating area of the duty-free shop to about 6,000 square meters. In 2023, Sanya Phoenix International Airport achieved tax-free related revenue of 225 million yuan, of which it obtained franchise revenue of 159 million yuan and revenue of 66 million yuan by providing duty-free pickup locations; it achieved investment income of 15 million yuan through participation in Sanya Phoenix Airport Duty Free Shop.
Steadily promote the elimination of real estate business and cultivate and build new business in the airport industry. In 2023, the company's real estate business achieved revenue of 3.05 billion yuan/yoy +45%. The company accelerated the elimination of existing real estate projects, concentrated on promoting the development and construction of projects such as the Hainan Center in the Dayingshan Area of Haikou City and the Haoting Nanyuan District 3, and promoting the commencement of construction of the Haikou Jiangdong F07 plot project, the aviation specialty cargo “super operator” project, and the aviation science and technology research and development base project.
The company actively participated in the development of the Jiangdong New Area in Haikou to cultivate and build new business in the airport industry, and plan to promote the implementation of the Hainan Free Trade Port Dafengguan Aviation Logistics and Processing Industry Demonstration Base Project. The first phase of the project covers an area of about 276 acres. It will build four industrial projects: an aviation special cargo super operator, an aviation science and technology research and development base, an aviation logistics public service center, and high-end aviation OEM manufacturing.
Investment advice: The company is deeply involved in the construction of the Hainan Free Trade Port. Many of its businesses, such as airport management, duty-free commerce, and property management, enjoy the dividends of the free trade port policy, and the company's medium- to long-term development prospects can be expected. We expect the company's net profit to be 1,399/16.33/1,839 billion yuan in 2024-2026, a year-on-year change of 46.8%/16.8%/12.6%. The PE corresponding to the current market value is 27X/23/21X, maintaining the “recommended” rating.
Risk warning: Residents' exit demand recovered below expectations; construction of the Hainan Free Trade Port fell short of expectations; macroeconomic decline; changes in the outlying islands duty-free policy, etc.