Incident Overview
The company released the 2023 Annual Report and the 2024 First Quarter Report. In 2023, the company achieved revenue of 1.42 billion yuan, +84% year-on-year, and achieved net profit of 275 million yuan to mother, +141% year-on-year. In the first quarter of 2024, the company achieved operating income of 177 million yuan, +228.72% year-on-year, achieved net profit to mother of 5.2368 million yuan, a year-on-year loss reduction, and realized net profit of 3.6848 million yuan after deduction, a year-on-year loss reduction.
Analytical judgment:
The main business fully recovered in 2023, the Convention and Exhibition Group exceeded its performance promises in 2023, and the company's conference, exhibition, competition and venue businesses fully recovered. A total of 13 large-scale conference events were held throughout the year; 18 exhibitions were held, with a total scale of over 1.1 million square meters, serving more than 1.3 million visitors; 8 events were held, with a total number of participants exceeding 77,000; the Shanghai World Expo Exhibition Hall operated by the company undertook 95 projects, with a total rental area of over 10 million square meters. Looking at the split business, the exhibition organization achieved revenue of 760 million yuan, an increase of 246.8%; the supporting services for the exhibition achieved revenue of 220 million yuan, a decrease of 6.6%; the event activities achieved revenue of 160 million yuan, an increase of 58.9%; and the exhibition hall operation business achieved revenue of 270 million yuan, an increase of 1007.8%. In 2023, the Convention and Exhibition Group achieved revenue of 1,362 million yuan, an increase of 84.55% over the previous year; achieved net profit of 180 million yuan after deducting non-return to mother; and completed 145.69% of the performance promise of 126.6 million yuan.
Profitability in 2023 surpassed the same period in 2021, and expense ratios continued to be optimized. Non-financial contributions increased profits in 2023, and the company's gross profit margin was 31.9%, an increase of 2.3 pct over 2021 (2022 was greatly affected by the pandemic and is not comparable). The company's sales expense ratio and management expense ratio in 2023 were 5.29% and 12.32% respectively, down 1.1 pct and 4.0 pct from 2021. The company's net interest rate after deduction in 2023 was 15.56%, up 2.57pct from 2021. In addition to the main business, the company's investment income, fair value change income, and asset disposal income totaled 167 million yuan in 2023, an increase of 164 million yuan compared with 2022, and an increase of 330 million yuan compared with 2021.
IP and resource advantages are outstanding. Focus on cultivating new exhibitions and internationalization strategies. On June 21, 2023, the Shanghai Municipal Commission of Commerce issued the “Shanghai Three-Year Action Plan to Promote High-Quality Development of the Exhibition Economy and Build an International Convention and Exhibition Capital (2023-2025)” (Shanghai Chamber of Commerce Exhibition [2023] No. 160). The plan is proposed that by 2025, the global resource allocation capacity of the Shanghai Convention and Exhibition will be further enhanced, the global influence and international competitiveness of the Shanghai Convention and Exhibition will be further strengthened, the market mechanism will be more mature, exhibition enterprises will be more dynamic, brand exhibitions will be more concentrated, and the international exhibition capital will be fully completed. As an enterprise directly under the Shanghai State-owned Assets Administration Commission, the company focuses on the main exhibition business, and has mastered core IPs such as the Industrial Fair, the Guangzhou Printing Exhibition, and the World Internet Conference, and is expected to gradually launch a “going global” strategy. The company announced that it plans to acquire 41% of Shanghai Tabus Exhibition Company's shares through fixed increment+ equity transfer, lay out the pet exhibition market, and advance the extension strategy again. According to the company's official account, the expo was successfully held in April 2024, and the scale of the fair was increased across the board. The exhibition period was extended from 3 days to 4 days. The number of professional visitors on the first day increased by 30% compared to last year.
24Q1 revenue grew sharply under a low base. The profit side reduced year-on-year losses. The company achieved operating income of 177 million yuan in the first quarter of 2024, or +228.72% year-on-year, mainly because the domestic exhibition industry was still recovering from a low base in the first quarter of last year. 24Q1 achieved net profit to mother of 5.2368 million yuan, a year-on-year reduction. Losses were mainly due to lower off-season revenue scale and rigidity of personnel costs (revenue for the first quarter of 2021 and 2023 was 7% and 4% of annual revenue, respectively). In 24Q1, the company's gross profit margin was 26.2%, up 24.66 pcts year-on-year. At the end of 2024Q1, the company had contractual liabilities of 202 million yuan, +58% year-on-year, laying the foundation for future revenue growth.
Investment advice
Based on the company's performance for the first quarter of 2023 and 2024, we adjusted our 24-25 profit forecast and added a 26-year profit forecast. We expect the company to achieve revenue of 16.7 billion yuan, 1.90 billion yuan, and 210 billion yuan respectively (the original forecast for 24-25 was 20.2/2.30 billion yuan), net profit to mother of 3.0, 3.2, and 340 million yuan (the original forecast for 24-25 was 30/350 million yuan), and EPS of 0.56, 0.60, and 0.63 yuan, respectively (the original forecast for 24-25 was 0.58/0.66 yuan). Referring to the closing price of 9.05 yuan/share on May 6, 2024, the corresponding latest PE was 16x/15x/14x, respectively, maintaining the company's “buy” rating.
Risk warning
(1) The influence of the company's core exhibition IP declined; (2) the company's new IP cultivation fell short of expectations; (3) the company's extended mergers and acquisitions fell short of expectations.