2024Q2's performance increased significantly, with smooth project payback, maintaining a “buy” rating of 2024H1, achieved operating income of 0.194 billion yuan (+261.28% year over year) and realized net profit of 20.257 million yuan (YoY +5424.74%); 2024Q2 operating income was 0.16 billion yuan (+328.58% YoY, +361.99% month-on-month), net profit to mother was 26.122 million yuan (YoY +600.33% YoY) (Loss is profit), net loss after deducting net loss of 0.4923 million (down 98.59% year on year). The high increase in performance was mainly due to the volume of cultural tourism and entertainment revenue. Based on the company's expectations of steady progress on the B-side and gradual expansion on the C-side, we maintain our profit forecast. We forecast net profit to be 0.198/0.241/0.278 billion yuan for 2024-2026, corresponding EPS of 1.04/1.26/1.45 yuan, respectively. The current stock price corresponds to PE of 21.0, 17.2, and 15.0 times, respectively, maintaining a “buy” rating.
Revenue from cultural tourism and performing arts activities has increased markedly, and customer repayments are good
Looking at the structure, 2024H1 large-scale performing arts activities achieved revenue of 39.78 million yuan (+5.05% YoY), revenue accounting for 20.50%, gross margin of 0.40%, mainly for the opening and closing ceremony of the 14th National Winter Games, etc. Cultural tourism and performing arts activities achieved revenue of 0.152 billion yuan (+100% YoY), accounting for 78.54% of revenue, and 43.71% gross margin, mainly for performances such as “Unbounded Chang'an” and Shanghai Tianshi 632 Art Space. The overall gross margin of 24H1 was 34.99%, down 4.94 pcts year on year, mainly due to the decline in gross margin of large-scale performing arts activities. Customer repayment conditions were good in 2024. As of June 30, 2024, the company's net cash flow from operating activities was 23.6054 million yuan (+46.30% year over year). The cost side was greatly optimized. The sales expense ratio was 3.68% (YoY -10.64 pcts), and the management expense ratio was 12.87% (YoY - 39.95 pcts), mainly due to the reduction in equity incentive expenses.
Revenue to be confirmed in 2024 was high, and additional C-side revenue began to grow, driving subsequent growth. By the end of 2024H1, the company's on-hand orders were 0.731 billion yuan and contract liabilities were 0.191 billion yuan, an increase of 3.74% over the end of 2024Q1. In terms of the revenue repayment schedule, the amount of revenue corresponding to performance obligations that have been signed but not yet performed or have not been fulfilled as of the end of 2024H1 is 0.656 billion yuan, of which 0.439 billion yuan is expected to recognize revenue in 2024. On the C-side, “Xiang Lake · Yayun” and “With Qingdao at Sea” each premiered since June, and are expected to contribute to performance in 2024H2. We are optimistic that the company's B-side projects will steadily confirm revenue after order fulfillment, while C-side projects provide performance flexibility and open up room for the company's performance growth.
Risk warning: execution risk of major national projects, risk of market competition, risk of gross margin fluctuations, etc.