Jiuhua Mountain: One of China's top four famous Buddhist mountains. In 2023, ticket revenue for scenic spots increased by 42% compared to 2019.

Jiuhua Mountain is one of the four famous Buddhist mountains in China. After the epidemic, visitors chased spiritual experiences such as temple tours, and combined the cost-effective nature of scenic tourism to meet consumer trends, driving a significant increase in the number of visitors to the scenic area. According to statistics from the Anhui Culture and Tourism Administration, ticket revenue for Jiuhuashan in 2023 (in unlisted companies) recovered to 142% in 2019.

Jiuhua Tourism: Deeply involved in the Jiuhuashan tourism industry chain. The main business concentration is high, ropeways contribute to core profits, and post-epidemic recovery is at the top. The company belongs to the Chizhou State-owned Assets Administration Commission and is deeply involved in the Jiuhuashan Scenic Area industry chain. It specializes in ropeway, cable car, passenger transportation, hotels, and travel agency businesses. In 2023, the company's scenic area transportation and lodging related businesses accounted for about 90% of revenue (other famous mountain and river scenic area companies were 70-90%). The high-margin ropeway, cable car and passenger transport business together contributed nearly 60% of revenue and nearly 90% of gross profit, which is the core of the company's profit. Considering other optional consumer projects/relatively low ROE businesses, there was little drag on, and the company recovered strongly after the pandemic. Revenue in 2023 was 724 million yuan, up 35% from 2019, ranking first among Mingshan Dachuan Scenic Area companies; net profit to mother was 175 million yuan, up 49% from 2019, second only to Changbai Mountain (the latter moved down the mountain gate to raise prices to help improve profit margins).

Seasonal characteristics: High and low throughout the year, and multiple factors of 2024Q1 disrupt poor performance during the peak season. In 2019, the company's revenue declined sequentially in Q2, Q1, Q3, and Q4, and was weak compared to peers seasonally (accounting for less than 30% of revenue in a single quarter). This is different from other natural scenic spot companies' peak operating season (accounting for more than 30% of revenue). We analyzed that, on the one hand, with the support of the company's Buddhist culture, people praying for blessings and worshipers are not very dependent on summer. On the other hand, Jiuhua Mountain has a large temperature difference between morning and evening in summer, and the high temperature during the day partly affects the travel experience.

After a high base brought about by the release of demand for compensatory travel in 2023, the company's 2024Q1 revenue and net profit to mother were -6.1% and -15.8% year-on-year, respectively. The peak season performance was poor, but it is still expected to grow positively after excluding disturbances.

Traffic improvements have been made in the short term, and the expansion of the long ropeway has continued to benefit from the advancement of the Dahuangshan strategy. The Jiuhuashan Scenic Area is undergoing marginal improvements in traffic. For short- and medium-distance visitors, self-driving traffic restrictions are imposed at scenic spots on holidays, but parking spaces under the mountain have already encountered bottlenecks. The functions of the Jiuhuashan Transportation Conversion Center were upgraded during the 2024 Spring Festival, and the number of parking spaces was increased from more than 1,000 to more than 5,000. At the same time, the newly renovated Jiuhuashan Station of the Chihuang High Speed Rail is close to the scenic area. Compared with the original Chizhou Station, the 40-minute drive from the scenic area is significantly improved. The line will be put into trial operation in March 2024, and it is expected that the conditions for opening will be in place by the end of April. For medium- and long-distance travelers, Jiuhuashan Airport is expected to operate within the year after expansion, and its passenger capacity will more than triple compared to 2019. Along with the advancement of the Dahuangshan strategy, the provincial government plans to achieve a CAGR of around 10% in tourism revenue and number of visitors in the Dahuangshan region from 2023-2033, and the company is expected to fully benefit. On this basis, the company continues to explore the expansion and upgrading of potential projects in the scenic area. Among them, if the Lion Peak Scenic Area project is approved and successfully put into operation, the company estimates that it will contribute 10 million in profit. Based on good and stable cash flow, the company's dividend rate was raised to 50% in 2023 from 30% previously.

Risk warning: Bad weather disrupts operations, new projects fall short of expectations, traffic improvement results fall short of expectations, etc.

Investment advice: Based on the assumption of steady growth in passenger flow, we expect the company's net profit to be 1.96 billion yuan from 2023-2025 to the mother, 1.77/1.95/2.13 yuan for EPS, and 21/19/17x for the corresponding dynamic PE. The company is a resource for famous Buddhist mountains and focuses on exploring the main business of the Jiuhuashan Scenic Area industrial chain. The resilience of post-epidemic recovery is at the forefront of natural scenic spots. Since this year, the holiday tourism boom has continued, and marketing hotspots have been rising one after another on weekdays, making the sustainability of the tourism industry continue to be verified. At the same time, the company also has expectations for marginal improvements in multiple dimensions of transportation and promotion of new projects. Short-term Q1 performance fluctuated, but considering the current resilience of residents to travel, the pursuit of spiritual experiences such as temple tours continues. At the same time, improvements in short-term traffic margins in the Jiuhuashan Scenic Area and passenger flow boosting effects under the promotion of the Huangshan Mountain Strategy are still expected, and the first coverage gave it an “gain” rating.