2024Q2 passenger flow continued, and expenses/non-operating expenses dragged down performance 2024H1. The company achieved revenue of 0.254 billion yuan/yoy +51.7%, net profit of 0.021 billion yuan/yoy +71.7%, after deducting non-return net profit of 0.027 billion yuan/yoy +138.3%; of these, 2024Q2 revenue was 0.127 billion yuan/yoy +29%, net profit due to mother 0.01 billions/yoy -37%, after deducting non-return Net profit to mother 0.015 billion yuan/yoy -2.1%. The 2024Q2 main scenic area received 0.6214 million/ yoy +33.1%. Strong growth continued during the off-season, driving a rapid increase in revenue. Q2 increased expenses such as facility maintenance, vehicle reserves, and project marketing to prepare for the peak summer season. Net operating cash flow during the period was 10.01 million yuan/yoy -72.8%; at the same time, various non-operating expenses (accident compensation/non-current asset scrapping losses) increased net by 7.04 million over the same period last year, leading to a decline in the profit side. Considering that the increase in expenses and summer weather disturbances in 2024 dragged down short-term performance, from a long-term perspective, we lowered our 2024 profit forecast and raised our 2025-2026 profit forecast. We estimated net profit to mother of 0.174/0.223/0.253 billion yuan (previous value: 0.186/0.217/0.251 billion yuan), yoy +26.2%/+27.8%/+13.6%, corresponding to EPS 0.65/0.84/0.95 yuan. The current stock price corresponds to PE of 35.1/27.5/24.2 times. I am optimistic that improvements in external traffic and increased passenger/hotel supply will drive performance improvements and maintain a “buy” rating.

The difference in the low passenger flow season is gradually bridging, and profitability is expected to improve steadily by business. 2024H1 transportation/hotel/travel agencies earned 0.173/0.062/0.006 billion yuan, corresponding to a gross profit margin of 33.8%/22.5%/37.6%. Among them, (1) Transportation sector: 2024H1 acquired the Chibei District Public Transport Company and continuously improved the chartered/online car-hailing service ecosystem. Among them, the subsidiary Zhixing Travel 2024H1 earned YOY +76.3%.

(2) Hotel sector: Benefiting from the high passenger flow base and mature brand mentality in the northern slope, the subsidiary Tianchi Hotel earned YOY +26.8%. Gross profit side: Q2 company's gross profit margin 30.6% /yoy-3.1 pct/month-on-month +2.43pct; cost side: Q2 sales/management/finance expense ratio 3.0%/11.3%/0.39%, yoy+0.12/0.32/-0.53 pct, respectively; under comprehensive influence, Q2 deducts net profit margin of 12.24% /yoy-3.89pct.

Diversified business formats strengthen drainage capacity, and the main logic of supply expansion+traffic improvement is steady short-term perspective: 0.578 million passengers/yoy -8.8% in the main scenic area in July, which is a short-term interference from abnormal typhoon weather (main scenic area closed for 5 days). Considering the low base in August 2023 and the company's capacity investment increased the daily reception limit, it is expected that passenger flow will continue to be high in the second half of the summer. Long-term perspective: As of July, the entire Shenbai High Speed Rail line foundation project has been completed. After opening in 2025, it will enter the high-speed rail era. The annual passenger flow of Changbai Mountain is expected to reach 5 million people, with an increase of more than 60%. The company level is speeding up the integration of regional resources, progressing steadily with fixed growth projects, supplementing regional passenger transport/hotel supply, and continuing to strengthen drainage capacity through diversified investments. According to the company's announcement, it plans to host and operate the main scenic area/surrounding resort community, and is expected to increase annual management revenue by about 5 million yuan. At the same time, it is planned to establish a joint venture with the controlling shareholder to further enrich the product industry and match the growth driven by incremental passenger flow.

Risk warning: Force majeure such as natural disasters; construction of hotel projects falling short of expectations; risk of fuel price changes.