Key points of investment:
The company released its report for the first quarter of 2024, and the results were in line with market expectations. According to the company's announcement, the company achieved revenue of 1,922 billion yuan in the first quarter of '24, an increase of 15.96% over the previous year. The company's net profit for the first quarter was -29 million yuan, with a loss of 4.8 million yuan in the same period last year. Losses increased compared to last year, mainly due to increased investment in new guest rooms and personnel during business resumption, as well as a sharp increase in depreciation, amortization, labor costs, etc. compared to the same period last year. The company's net cash flow from operating activities in the first quarter was 29.53 million yuan, compared to -56.48 million yuan in the same period last year, mainly due to significant growth in the travel agency sector.
The recovery of passenger flow in Wuzhen continues to rise, and the revenue side of Gubei Water Town is under pressure in the short term. The Wuzhen Scenic Area received 1.4794 million visitors in the first quarter of '24, an increase of 16.11% over the previous year, and recovered to 88% in the same period in '19. The recovery in passenger flow continued to increase. Wuzhen achieved revenue of 357 million yuan in the first quarter, up 7.93% year on year. The year-on-year decline in net profit in terms of profit was mainly due to the year-on-year increase in labor costs and depreciation and amortization of scenic spots. The number of visitors received by Gubei Water Town in the first quarter of '24 was 183,000, down 26.38% year on year, achieving revenue of 112 million yuan, up 32.16% year on year. Due to the gradual increase in supporting investment in employees, hotel rooms, etc. compared to the first quarter of 2023, labor costs and depreciation and amortization of scenic spots increased year on year, and net profit declined year on year during the reporting period.
Wuzhen achieved a customer unit price of about 241 yuan in the first quarter of '24, a slight decrease of 7% from the previous year. The customer unit price in Gubei Water Town was about 612 yuan, down 7.8% from the same period last year. Overall, the profit side of the two towns was greatly affected by increased costs such as labor, depreciation and amortization. Passenger flow in Gubei Water Town was affected by the diversion of long-distance travel, etc., and the passenger flow and revenue side were under pressure.
China Youth Expo Federation focused on strategic business and customers, and the travel agency business grew. In terms of integrated marketing business, the China Youth Expo Federation served high-level government exhibition projects such as the World Tunnel Conference and the Chengdu World Garden Conference, successfully completed dozens of major projects with more than 1,000 people, maintained a leading position in the industry, and further demonstrated its brand strength. On the overseas side, the China Youth Expo Federation deeply served the exhibitions of many well-known domestic companies, the US International Consumer Electronics Show, and the Spanish Mobile World Conference to help the Beijing Overseas Cultural Exchange Center to enjoy the Spring Festival project. In the first quarter, China Youth Expo Federation achieved revenue of 322 million yuan, an increase of 35.03% over the previous year.
In terms of travel agency business, under the impetus of favorable policies such as visa-free access, convenient customs clearance, and route restoration, inbound and outbound travel is improving steadily. The company focuses on the outbound travel market, introducing short-haul cross-border charter products such as the Maldives and Phuket, self-organized products for long-term destinations such as the Middle East Africa and Europe, and new ways to play with the Belt and Road Global Optimizer. During the Spring Festival, the company's travel service sector received nearly 10,000 visitors, achieving a 929% increase in revenue over the same period in 2023. During the reporting period, the travel agency business revenue increased year on year, and net profit remained flat year on year.
Investment analysis opinion: As a high-quality ancient town in the country, Wuzhen brings stable and healthy cash flow to the company. The hotel occupancy rate and customer unit price in the scenic area business have high room for growth, the external environment for outbound travel has improved, and the performance of travel agencies and integrated marketing can be expected to be flexible.
We maintain our 24-26 profit forecast. We expect the company to achieve net profit of 4.09/5.92/751 million yuan in 24-26. The current stock price corresponds to the 24-26 PE of 20/14/11 times, maintaining a “buy” rating.
Risk warning: The recovery of surrounding tourist attractions fell short of expectations, progress of new projects fell short of expectations, etc.