Incident Overview
The company released its report for the first quarter of 2024. 2024Q1 achieved operating income of 76.13 million yuan, +12.2% year-on-year, realized net profit of 4.81 million yuan, +349% year-on-year, and realized net profit of 1.53 million yuan after deduction, or +311.56% year-on-year. Non-recurring profits and losses are mainly profits and losses from changes in the fair value of financial assets and financial liabilities and profits and losses from disposal of financial assets and financial liabilities ($3.14 million).
Analytical judgment:
The increase in booth sales led to steady revenue growth. The profit margin is low under cost rigidity. The number of booth sales in 24Q1 is expected to be around +15% year-on-year, which is basically in line with revenue growth. According to the official website, 2024Q1 held a total of two exhibitions in Indonesia and Vietnam, with 500+ and 600+ booths respectively. 2023Q1 held a total of 1,000 booths in Indonesia. The number of booth sales is expected to increase by about 15% over the same period last year, which is basically in line with the increase in revenue.
Due to cost rigidity, gross margin declined somewhat. The 24Q1 company's gross profit margin was 54%, -3.8 pct year on year. Mainly due to the strong scale effect of the exhibition industry, the gross margin declined due to the reduction in the scale of individual exhibitions. The 24Q1 company's sales expenses ratio and management expense ratio were 42.1% and 12.7%, respectively, +0.3 pct and -3.7 pct, respectively, after deducting non-return net profit margin of 2%, an increase of 1 pct year over year.
Contract debt has declined due to exhibition scheduling factors, and the annual level is still expected to perform well. As of March 31, 2024, the company's contract debt amount was 170 million yuan, -24% over the same period. We believe that the decline in contract debt was mainly due to: 1) exhibition schedule factors. According to the company's 2023 annual report, the company held 8 exhibitions in Q2 2023, while the 2024Q2 company only had 4 exhibitions, so we expect a certain misalignment during the peak sales period, which will affect the performance of contract debt at the end of the first quarter, and we can still expect good growth throughout the year; 2) The contract debt is the pre-sale amount of booth fees, which may be affected by changes in deposit ratios, or may not fully reflect the increase in carry-over revenue.
The company has deep barriers, an excellent business model, and a medium- to long-term high-growth exhibition. We believe that the company will continue to enjoy racetrack dividends. At the same time, the company has outstanding resources, flexible management strategies, and high growth in the medium to long term. 1) The company is a leader in outreach and has deep operating barriers. According to the company's annual report, the company's overseas exhibition area, number of exhibitors, number of booths, etc. all accounted for more than 50% of the parameters of the overseas exhibition project approved and implemented in 2023, ranking first among domestic exhibitors organizing overseas exhibitions. The first-mover advantage in IP, pavilion resources, and overseas layout is remarkable. 2) Continued promotion of specialization and internationalization to help long-term growth. The specialized layout is gradually taking shape, organizing industry forums, empowering Chinese manufacturers and Chinese brands to go global, serve more suppliers on the basis of deep industry cultivation, expand the scale of professional exhibitions, and attract more professional buyers to participate in the company's professional exhibitions, forming a virtuous circle. The company invested in the establishment of a wholly-owned subsidiary in Singapore and set up a company in Indonesia to help develop the RCEP national exhibition business. The exhibitors are expected to gradually expand to overseas foreign trade enterprises. 3) Digital construction enables exhibition upgrades. According to the company's annual report, the company has achieved widespread use of AI in data matching, content generation, and video production, and has gradually created a data-driven digital professional exhibition to accurately connect the entire link of digital exhibition, digital exhibition, and digital exhibition viewing.
Investment advice
We maintain our previous profit forecast. We expect the company to achieve 24-26 revenue of 11.5/14.2/1.66 billion yuan, net profit to mother of 2.8/3.5/4.4 billion yuan, and EPS of 1.82/2.30/2.84 yuan, respectively. Referring to the closing price of 33.84 yuan/share on April 26, 2024, the corresponding latest PE was 19x/15x/12x, respectively, maintaining the company's “gain” rating.
Risk warning
(1) Risks such as entry and exit restrictions and exhibition delays caused by repeated epidemics; (2) the risk of international political conflicts impacting the economies and exhibitions of countries or regions such as the “Belt and Road” and RCEP; (3) the risk of declining export trade; (4) the 2021 company was issued a warning letter due to inconsistency between the performance forecast and the final audit results.