The company released its 2024 semi-annual report. 24H1 achieved revenue of 0.385 billion yuan, -1.93% YoY; net profit to mother 0.112 billion yuan, -7.22% YoY. Performance has declined slightly in the short term, and the domestic tourism market continues to be booming. The peak season operating performance is worth looking forward to. They are also optimistic that the implementation of subsequent new projects will contribute to an increase in their holdings and maintain the rating of increase in holdings.

Key points to support ratings

24H1's performance declined slightly year over year. 24H1 achieved revenue of 0.385 billion yuan, -1.93% YoY; net profit to mother 0.112 billion yuan, -7.22% YoY. Among them, 24Q2 achieved revenue of 0.205 billion yuan, -3.52% YoY; net profit to mother 0.056 billion yuan, or -14.20% YoY.

The large ropeway was suspended several times due to the climate, and the number of small to medium ropeways received increased significantly. 24H1's three ropeways received a total of 3.2367 million visitors, +7.65% over the same period last year. Among them, the Glacier Park Ropeway received 1.5019 million visitors, -8.14%, which was mainly suspended due to climate and maintenance; the Yunshanping Ropeway received 1.4661 million visitors, +19.97%; and the Yakniuping Ropeway received 0.2688 million visitors, +79.39% year over year. The ropeway transportation business achieved a total revenue of 0.198 billion yuan, +1.46% year over year, gross margin of 83.82%, or -1.78 pct year on year.

The number of visitors to the show has been steadily increasing, and the hotel service business is under relative pressure. 24H1 Impressions performed 395 shows in Lijiang, +13.83% year over year; received 0.8618 million visitors, +7.85% year over year; achieved revenue of 74.753 million yuan, or -1.79% year over year. Lijiang Hefu Hotel Co., Ltd. achieved revenue of 58.4334 million yuan, -8.87%; Diqing Shambhala Tourism Investment Co., Ltd. achieved revenue of 11.6374 million yuan, -16.33% year over year; and gross margin of the hotel service sector -13.14 pct year on year.

The popularity of summer tourism in Lijiang continues unabated, and the peak season performance is worth looking forward to. According to Lijiang Cultural Tourism, in July '24, Lijiang Airport completed a total of 6,703 transport flights and a passenger throughput of 0.913 million passengers, +34.95% and 40.32%, respectively. From January to July '24, Lijiang Airport completed a total of 36,471 transport flights and a passenger throughput of 4.7613 million passengers; +9.67% and +10.32% year-on-year respectively.

Construction of new projects is progressing steadily, and subsequent supply-side increases can be expected. The Indigo Hotel Lugu Lake began trial operation on July 30, fully seizing the peak summer business window. It has 190 guest rooms and is expected to achieve an average annual revenue of about 50 million yuan. Xuechuan Company added new site rental, standby services, and shop rental services; the Yakniuping Tourist Ropeway renovation and expansion project is progressing steadily, which is expected to increase carrying capacity during the peak season.

valuations

The domestic tourism market maintains a high level of prosperity, and we expect business performance during peak seasons such as summer and National Day in the short term; in the long run, the company's tourism resources are of high quality, and we are optimistic about the increase brought about by supply-side optimization of scenic spots, hotels, etc. We expect the 24-26 EPS to be 0.43/0.47/0.52 yuan, with a corresponding price-earnings ratio of 19.5/17.8/16.3 times. Maintain an increase in holdings rating.

The main risks faced by ratings

Market competition risks, new project construction cycle risks, natural disasters and other force majeure risks.