occurrences

On August 28, 2024, the company disclosed the 2024 semi-annual report. 1H24 achieved revenue of 1.18 billion yuan/+ 59.0%, net profit due to mother 0.55 billion yuan/ +81.8%, after deducting non-return net profit of 0.547 billion yuan/ +85.2%. 2Q23 achieved revenue of 0.62 billion yuan/ +22.1%, net profit due to mother 0.299 billion yuan/ +23.2%, after deducting non-attributable net profit of 0.298 billion yuan/ +48.2%.

reviews

The park's performance is fragmented, and the new project in Guangdong is already profitable. Looking at 1H24's business segment, live performing arts revenue was 0.88 billion yuan/ +49.7%, gross profit margin was 59.1%/4.4%, travel service revenue was 0.27 billion yuan/ +102%, and gross profit margin was 98.7% /+0.2pct. Among them, live performing arts achieved high revenue growth and gross margin increase driven by a low base ratio plus growth in new parks (Shanghai and Guangdong projects). Specific project performance is divided. The new project climbed rapidly in Guangdong. Looking at key parks: 1) Hangzhou Songcheng's revenue was 0.293 billion yuan/ +29.4%, recovering to 73.5% in '19, with a gross profit margin of 60.5% /-0.3pct; 2) Sanya Qianguqing's revenue was 0.112 billion yuan/ +6.5%, recovering to 48.1% in '19, with a gross profit margin of 78.9% /-0.2pct, which was greatly affected by local passenger pressure in Sanya; 3) Lijiang Qianguqing's revenue 0.125 billions/ -7.7% , recovered to 86.4% in '19, with a gross profit margin of 76.9% /-3.5pct; 4) Guangdong Qianguqing had revenue of 0.126 billion yuan and gross profit margin of 68.0%. According to corresponding subsidiary data, net profit was 49.46 million yuan and net interest rate of 58.8%, showing impressive performance; 5) Among other parks, revenue increased and profits were steady. In terms of expenses, the 1H23 sales/management expenses ratio was 4.5%/7.4%, compared to +1.8/-0.6pct compared to the previous year. The sales expenses ratio increased or increased due to the opening of new projects, etc.

In terms of profit margin, 1H23 net interest rate after deducting non-return from mother is 46.5% /+6.6pct, single Q 248.2% /+0.8pct, compared to 2Q19 +3.9 pct, profitability continues to increase.

The summer season has a high year-on-year base, and new parks such as Xi'an, Guangdong, and the Three Gorges have performed well. According to statistics on the number of performances of the Songcheng Performing Arts official mini-program, there was year-on-year high base pressure in some parks in July '24, but Guilin and Lijiang still had a 28% and 35% increase in the number of monthly shows compared to the same period in '19. Xi'an Park benefited from urban tourism popularity, and the number of shows per day for the Guangdong project increased significantly compared to Q2. Furthermore, at the end of July, the Three Gorges Chronicles were newly opened. According to data from the company's official account, 170 shows were performed in the first month and received nearly one million visitors. The initial performance was beautiful.

Profit Forecasts, Valuations, and Ratings

The company's performing arts business has deep barriers and continues to benefit from the recovery of the domestic tourism market. New projects have performed brilliantly and continuously verified offsite replication capabilities. The company's 24E-25E net profit is expected to be 1.12/1.45/1.64 billion yuan, and the corresponding 24E-25E PE is 17/14/12X, maintaining a “buy” rating.

Risk warning

The recovery in tourism spending was lower than expected, and the pace of expansion of new projects was lower than expected.