Jiuhua Travel released its 2023 annual report. Focus on the performance for the full year of '23: Judging from the revenue/profit performance, the company's revenue in 2023 was 734 million yuan/year over year, +34.70%; net profit to mother was 175 million yuan/year on year turned into profit, +49.26% over the same period in '19; corresponding ROE was 13.12% /10.17% for the same period in '19. Judging from the performance of various expense ratios, the company's sales expense ratio in 2023 was 5.36% /-1.85pcts, compared with the same period in '19; the management expense ratio was 13.00% /-8.07pcts, compared to the same period in '19; the financial expense ratio was -0.26% /-0.23% for the same period in '19, and -0.12% for the same period in '19. Judging from the gross margin/ net margin performance, the company's gross profit margin in 2023 was 49.62%/+23.18pcts, compared to the same period in '19, +1.49pcts; the net profit margin was 24.14% /yoy +28.26pcts, +2.35pcts compared to the same period in '19. Focusing on 24Q1 performance, 24Q1 revenue was 180 million yuan/-6.13% YoY, +34.69% over the same period in '19; net profit to mother was 52 million yuan/YoY -15.80%, +34.40% over the same period in '19.

We believe that judging from the company's performance in '23, 1) high fixed costs/low variable costs made the ratio of net profit growth to revenue growth greater than 1, leading to high performance flexibility; 2) the absolute value of sales and management expenses increased, but the ability to control the sales rate/management expense ratio was strong, which contributed to the upward trend in net interest rates; 3) the company's 23-year ROE level was high, showing strong profitability. Judging from 24Q1's performance, 24Q1's revenue/net profit declined compared to the same period in '23. We think it was mainly due to climatic factors. The scenic area was suspended due to rain, snow, and freezing weather for several days since February 21, '24, making 24Q1 less than the same period in '23.

Dividend plan and new project expectations: The dividends far exceed the same period in '19, and construction of the Lion Peak Scenic Area is scheduled to begin in December '24. Looking at the dividend plan, the company plans to pay cash dividends of 7.9 yuan (tax included) for every 10 shares in '23 (2.2 yuan per 10 shares in '19), with a total cash dividend of 87 million yuan; dividends accounted for 50.06% of net profit to mother (20.81% in '19). Calculated at the closing price on April 18, the dividend rate was 2.04%. The dividend distribution in '23 far exceeded the level of the same period in '19. Judging from the future investment plan, the company's Lion Peak Scenic Area ropeway passenger transport project is expected to start construction in December '24 and be put into use in November '26, including the ropeway project and the alpine sightseeing trail project; the total investment of 326 million yuan, including the ropeway is about 295 million yuan, the alpine sightseeing trail is about 31 million yuan, and the estimated investment amount is 80 million yuan in 24 years; the actual length of the ropeway is about 3,415 meters, and the width is controlled at 1.5-2 meters. Lion Peak is located around Mount Jiuhua, and putting the ropeway project on the agenda will bring it a new medium- to long-term logic.

Investment advice: Optimistic about the subsequent growth of tourism in Jiuhua, focusing on the three major logics: traffic optimization: parking lot expansion/Chihuang high speed rail opening expectation/Jiuhuashan Airport expansion anticipation optimizes scenic traffic, and subsequent passenger traffic is expected to grow; 2) Performance elasticity: the hotel/ropeway/passenger transport business performance is highly flexible, and the trend of net profit to revenue growth higher than 1 in 23 years is expected to continue. Passenger flow growth will promote gross margin/net margin optimization; 3) Strong demand: Jiuhuashan's high popularity combined with Buddhist attributes brings high long-term popularity to the temple. Temple tour attributes match the needs of young groups, and the demand side is expected to be long-term Exuberant. The company's net profit for 24-26 is estimated to be 2.30/2.44/261 million yuan. The corresponding PE value is 18X/17X/16X, maintaining the “recommended” rating.

Risk warning: Risk of wind direction shift in hot spots in scenic spots, risk of traffic optimization projects falling short of expectations.