Description of the event

In 2023, we achieved operating income of 1,929 billion yuan, an increase of 141.21%; realized net profit of 423 million yuan, an increase of 553 million yuan over the same period last year (after adjustment), turning a loss into a profit; net profit of 391 million yuan after deducting net income from mother, which turned a loss into a profit over the previous year.

Incident comments

Demand for natural scenic spots is booming, compounded by the company's diversified marketing activities, and passenger traffic into the mountains has increased dramatically, driving a high increase in revenue.

2023 is the first year of normalization of travel. Natural mountain scenic spots are favored by consumers, and demand continues to be superior to leisure and vacation spots; the company followed the trend and attracted visitors through “free discount” tickets, seizing special customer groups such as parents and children, establishing a live tour guide management service mechanism, and recruiting tour experience officers. It received 4.574,600 visitors to the mountains throughout the year, an increase of 227.48% over the previous year, an increase of 227.48% over the 3.5 million in 2019.

In terms of profitability, the revenue side was high, and the cost side was relatively rigid, and gross margin was greatly boosted year over year. However, due to the fact that Taiping Lake, Huashan Mysterious Cave, and the Huicai sector were still slightly hampering gross margin, the company's comprehensive gross margin still had a slight gap compared to 2019. At the same time, the dilution effect on the revenue side on the sales and management expenses side boosted the company's overall net interest rate level. The company's comprehensive gross profit margin in 2023 was 54.02%, +33.67 pcts year-on-year, and -1.95 pcts compared to 2019. In 2023, the company's revenue and net profit to mother recovered to 120% and 124% respectively in the same period in 2019.

The global layout is being fully promoted, and efforts such as hotel project upgrades, ropeway+business linkage, operation of new stores in Huishang's hometown, and exploration of asset-light models are progressing steadily. In 2023, the strategic layout of Dahuangshan around “mountains, water, villages, and caves” was fully optimized, and secondary entrepreneurship progressed steadily. On the mountain side, the Shilin Cliff House and the “Monkey Easy” travel home supply station were put into operation, and the Beihai Hotel Environmental Remediation Project, the Xihai Hotel, and the Mountain Hotel refinement project continued to advance; on the water side, the Taiping Lake Scenic Area top-level design plan was basically completed, and a 9% stake in Taiping Lake Cultural Tourism was acquired to steadily advance the Pinghu Holiday Hotel renovation project; on the village side, construction of the “Huakai Nanxi” project continued to advance the preliminary work of the Chatan Tent Camp project to plan and reserve micro-tourist destination projects; Tour-themed activities, and diversify the supply of night tour products, new Some experiential programs continue to launch the Huashan World Night Tour brand. Business expansion represented by Huicai store expansion, cableway operation and management output, smart tourism, and management quality improvement explores new growth momentum for the company's development. In 2024, the company will accelerate the pace of mountainous and shanshita hotel renovation and upgrading projects, improve the Taiping Lake business layout, and ensure that the Pinghu Holiday Hotel renovation project is put into operation on schedule; build a ropeway+ business model, relying on the expansion of the ropeway project to drive the export of the company's diversified business segments; while promoting the operation of direct-run stores, the hometown of Huishang will accelerate the export of an asset-light model and enhance brand value.

The optimistic company will benefit from multiple benefits such as improved traffic conditions, the transformation of hotel projects, and the upgrading of the catering business model to achieve a steady increase in revenue performance. In 2024, the Chihuang High Speed Rail is about to open, and passenger flow into the mountains is expected to improve further; the volume and price are expected to rise again with the renovation and upgrading of the Shanshang Mountain Hotel sector; in the restaurant sector, new stores in Huishang's hometown sector are maturing one after another and exploring the expansion of an asset-light model, which is expected to reduce the drag on the company's performance. The company's net profit for 2024-2026 is estimated to be 4.8/5.3/570 million, respectively, and the corresponding PE is 20/18/17X, respectively, maintaining a “buy” rating.

Risk warning

1. Passenger flow recovery falls short of expectations;

2. Huicai's expansion is progressing slowly;

3. New scenic spot projects have not successfully reduced losses;

4. The pace of improvement of the hotel sector project falls short of expectations.