Key points of investment:

Investment advice: Considering that traffic improvements are still supported by expectations, maintain the company's 2024-2026 EPS forecast of 1.85/1.99/2.15 yuan, maintain the target price of 45.11 yuan, and maintain the holding increase rating.

Performance summary: The company 24H1 achieved revenue of 0.395 billion yuan/ +3.92%, profit to mother of 0.114 billion yuan/ +2.65%, net interest rate of 28.93%/-0.36pct, net profit of 0.109 billion yuan/ +2.03%, net profit of 27.61%/-0.51 pct; single 24Q2 achieved revenue of 0.215 billion yuan/ +14.17%, gross profit of 0.115 billion yuan/ +25%, Gross profit margin 53.77% /+4.59pct, sales expense ratio 3.35% /+0.05pct, management expense ratio 12.12% /-0.96pct, profit to mother 0.0622 billion yuan/ +25.69%, profit margin to mother 28.97% /+2.66pct, net non-return of 0.06 billion yuan/ +27.33%, net non-return profit margin 27.97% /+2.89pct.

The profit side slightly exceeded expectations, and high operating leverage brought high flexibility. The high profit side growth was mainly driven by passenger flow growth. The overall passenger flow growth in the second quarter was basically the same as the revenue side trend, and high operating leverage brought high elasticity; as of July, the passenger flow data for Changbaishan/Jiuhua/Lijiang shares remained flat year on year. Affected by strong convective weather, the overall business data of the scenic area sector for the third quarter still needs to be observed. Furthermore, considering that the third quarter of Jiuhua was not a peak season (the base is relatively low) and the opening effect of the Chihuang High Speed Rail is gradually showing, the operating data trend is particularly critical.

The passenger transport business has been significantly boosted, and the expansion of parking lots and traffic control have effectively boosted actual passenger flow.

24H1's hotel/ropeway/passenger transport/travel agency/other business revenue growth rates were +3/-6/+28/+18/ +61%, respectively. Among them, passenger traffic contributed significantly to revenue mainly being objectively driven by the expansion of parking spaces in the parking lot in February 24 and the regulation of private cars up the mountain. The gross margin side passenger transport business also showed high operating leverage; the investment announcement for the Lion Peak project was in line with expectations. The project plan is to start construction in December 2024 and be completed and put into use in November 2026.

Risk warning: High travel costs, extended subsidies and benefits, and economic recovery falling short of expectations.