The company released its 2023 annual report and 2024 quarterly report. In '23, the company achieved revenue of 1,926 billion yuan, +320.76% year on year; net profit to mother - 110 million yuan, -130.20% year over year. The 24Q1 company achieved revenue of 560 million yuan, +138.70% year on year; net profit to mother was 255 million yuan, +317.33% year over year. Currently, the Huafang depreciation project has been implemented, and the company's main business is recovering. We are optimistic about the gradual recovery of mature projects and the rapid climb of new projects, and maintain the purchase rating.
Key points to support ratings
The value of flower houses has been reduced, and the main business is picking up. In '23, the company achieved revenue of 1,926 billion yuan, +320.76% year on year; net profit to mother - 110 million yuan, -130.20% year over year. Excluding investment income and impairment losses resulting from holding long-term equity investments in Huafang Group, net profit was 829 million yuan. Zhongxi Certified Public Accountants issued an unqualified audit report on the company's 2023 annual report.
The degree of recovery of various scenic spots was divided, and Guilin and Zhangjiajie performed well. The Hangzhou/Lijiang/Sanya/Jiuzhai/Guilin/Zhangjiajie/Shanghai/Xi'an projects achieved revenue of 6.2/3.2/1.9/0.9/0.7/1.0/ 0.5 billion yuan respectively, with gross margins of 63.1%/79.1%/75.6%/60.0%/76.2%/38.7%/-16.2%/-32.9%, respectively. Among them, revenue from the Hangzhou/Lijiang/Sanya/Guilin/Zhangjiajie projects recovered to 73%/97%/51%/120%/109% in 2019, respectively. The revenue of the Guilin and Zhangjiajie projects has surpassed 19 years, and the pace of recovery is different in various regions, which is expected to be related to the degree of recovery of local group tours; the Shanghai and Xi'an projects reopened in 23 and are still climbing.
24Q1 performance returned to 70% of pre-epidemic levels, and the performance of the Foshan project exceeded expectations. The 24Q1 company achieved revenue of 560 million yuan, +138.70% year over year, recovering to 68% in 19Q1; net profit to mother was 255 million yuan, +317.33% year over year, recovering to 68% of 19Q1. Looking at each project, among mature projects, revenue from Lijiang and Guilin exceeded the same period in '19; since the opening of the first day of the new year, the Foshan project has performed 9 shows in a single day for many consecutive days, breaking many records of “love through the ages”. As of the end of March, the average number of shows per day exceeded 5, and the response was enthusiastic.
As a first-tier tourist and leisure destination and a project located outside of key commercial cities, the outstanding performance of the Foshan Ancient Scenic Area provided more lessons for subsequent project expansion.
valuations
The company's mature project capacity has increased, and it has returned to the rapid recovery path. The response after the opening of the new project is expected to rise rapidly, and medium- to long-term growth potential can be expected; Huafang has depreciated and implemented to eliminate short-term risks.
In the short term, due to pressure on group customer recovery, we expect the company's 24-26 EPS to be 0.47/0.58/0.65 yuan, with corresponding price-earnings ratios of 22.0/17.8/16.0 times, respectively, maintaining the purchase rating.
The main risks faced by ratings
Consumer consumption recovery falls short of expectations, progress of new projects falls short of expectations, and risk of safety accidents.