Conclusions and recommendations:

Incident summary:

According to the “Huangshan Today” official account, Tiandu Peak, one of the three main peaks, ended its closed rotation and resumed opening to the public on May 20.

Comment:

The resumption of opening before the peak season is expected to further catalyze passenger flow. Five years ago, Lianhua Peak opened in late March (Lianhua Peak and Tiandu Peak take turns, the rotation period is 3-5 years). For this reason, it has long been anticipated that Tiandu Peak will resume opening this year. Huangshan Scenic Area received a total of 827,000 visitors in 24Q1. Although this figure is slightly lower than last year (yoy -2.12%), it is still far better than the same period in 2019 (29Q1 was 590,000); in addition, it received nearly 130,000 visitors during the May 1st period, an increase of 9.7% over the previous year, which is a good performance. Since Lianhua Peak and the end of last year had a closed rotation, Tiandu Peak was reopened at Duanzhou. Combined with the Changjinghuang High Speed Rail and the Chihuang High Speed Rail, the popularity of the scenic area is expected to remain high as the peak season approaches.

The difference in the superposition base of the cultivation project affected Q1 profit. 24Q1 achieved revenue of 340 million yuan, a year-on-year decrease of 0.4%, and recorded net profit of 0.3 billion yuan, a year-on-year decrease of 60.5%. The slight decline in revenue was mainly due to a decrease in the number of valid ticket purchasers under the free ticket policy. The profit side was mainly affected by the rapid expansion of Huicai's business in 2023 (+85% revenue in 2023), increased depreciation and amortization due to the opening of new stores (gross margin decreased by 8.2 pcts year on year), and the lower 23Q1 income tax base (losses from previous years can be partially exempted from income tax). It is expected that as the Huicai business climbs and differences in the tax base are eliminated, the company's profit-side performance will gradually improve.

Looking at the medium to long term, at the end of last year, Anhui Province issued the “Action Plan for the Construction of a World-Class Leisure, Vacation and Health Tourism Destination in Dahuangshan”. By 2033, the gross domestic product of Dahuangshan will reach 1.4 trillion yuan, receive more than 670 million domestic visitors, and more than 790 billion yuan in tourism revenue. In recent years, the company has dug deep into the value of Huangshan IP and simultaneously promoted the internal transformation of the scenic area and expansion of the business format. It is expected that with policy support, it will achieve steady and continuous growth in performance.

It is expected that 2024-2026 will achieve net profit of 470 million, 540 million, and 580 million, respectively, with EPS of 0.65 yuan, 0.74 yuan and 0.79 yuan respectively. The current stock price corresponding to PE is 18, 16, and 15 times, respectively, to maintain “buy-in”.

Risk warning: Abnormal weather caused passenger flow to fall short of expectations