The company released its 2023 annual report. In '23, the company achieved revenue of 1,929 billion yuan, +141.21% year-on-year; realized net profit of 423 million yuan to mother, reversing a year-on-year loss of 555 million yuan. The company's performance has been growing steadily in '23. In the future, it is still optimistic that the free ticket policy and the addition of high-speed rail will boost passenger flow in scenic spots. Continued improvements in various businesses can be expected, and the increase in holdings is maintained.

Key points to support ratings

In '23, the company turned a loss into a profit. In '23, the company achieved revenue of 1,929 billion yuan, +141.21% year over year; realized net profit of 423 million yuan, reversing loss of 553 million yuan year on year, +24.32% year on year 19; net profit after deducting non-return to mother of 391 million yuan, reversing year on year 572 million yuan, year on year +24.94% year on year.

Passenger flow reached a record high to drive business recovery, and the strategic layout was fully optimized. Benefiting from the impact of the free ticket policy, the number of visitors to the scenic area reached a record high, driving a high growth in the scenic area and ropeway business. In '23, Huangshan Scenic Area received a total of 4.5746 million visitors, +227.48%; ropeways and cable cars carried 9.5061 million visitors, +207.69% over the same period last year. The revenue of the scenic area business was +221.86% year over year, +24.25% year on year; gross margin has not yet recovered to the level of '19, mainly because Huashan Maze Caves and Taiping Lake Scenic Area are still in a climbing period, and the two scenic spots have not yet achieved profits in '23, and it is expected that they will benefit from the addition of high-speed rail lines in the future. The revenue of the ropeway business was +208.22% year-on-year, and +26.27% year-on-year. Due to cost rigidity, gross margin increased slightly compared to '19.

Improving high-speed rail lines and continuing the free ticket campaign is expected to boost passenger flow in scenic spots. In December '23, the Changjing—Huang high-speed railway line was officially completed and operated, connecting Huangshan with many cities in Jiangxi. The Chihuang High Speed Rail will be officially put into operation at the end of April '24. After the opening of this line, it will connect Jiuhua Mountain, Huangshan Mountain, and Taiping Lake to form a “two mountains and one lake” golden tourist route, attracting more high-quality customers. In addition, the Q2 main scenic area will continue the “free discount” campaign. Every Wednesday, visitors will be free; half tickets will also be offered to citizens of the 7 cities of Dahuangshan, Quhuang Nanrao, and Jingdezhen. By improving the external transportation network and combining discounts, we expect to boost the number of visitors to the scenic area.

valuations

The company's performance has been growing steadily in '23, and the number of visitors received has caught up with pre-pandemic levels. The free ticket policy will continue to help in the short term; in the medium to long term, external transportation routes are gradually being improved, and the company's various businesses can be expected to continue to improve and increase. We expect the company's 24-26 EPS to be 0.68/0.74/0.77 yuan, with corresponding price-earnings ratios of 19.7/18.2/17.4 times, respectively, maintaining an increase in holdings rating.

The main risks faced by ratings

The recovery of the industry falls short of expectations, and risks such as the difficulty of implementing transformation and expansion.