The company released its 2024 semi-annual report. 24H1 achieved revenue of 0.834 billion yuan, -0.39% YoY; net profit to mother 0.132 billion yuan, or -34.10% YoY. In the short term, the company's performance is under pressure due to multiple factors. In the medium to long term, various businesses can be expected to continue to improve and increase their holdings rating.

Key points to support ratings

Extreme weather and free ticket policies dragged down revenue, and a lower year-on-year tax base affected performance. 24H1 achieved revenue of 0.834 billion yuan, -0.39%; net profit to mother of 0.132 billion yuan, or -34.10%; of these, 24Q2 achieved revenue of 0.498 billion yuan, -0.36% YoY; and realized net profit of 0.106 billion yuan, or -21.49% YoY. The decline in performance was mainly affected by free ticket concessions and continued heavy rainfall in June. At the same time, there were recoverable losses last year, and income tax expenses increased year over year.

The ropeway business is resilient, and the rest of the business is under pressure. 24H1 Huangshan Scenic Area received a total of 2.1396 million visitors, +2.30%; ropeways and cable cars carried 4.2098 million visitors, +1.06% over the same period; due to a decrease in the number of valid ticket purchasers, ticket revenue for the scenic area declined. The 24H1 hotel/ ropeway and cable car/ scenic area/ tourist service/ Huicai business achieved revenue of 1.92/3.09/0.098/0.199/0.123 billion yuan respectively, compared with previous year

-3.09%/+1.30%/-15.95%/-1.36%/+7.78%, gross margin -2.72pct/+0.93pct/-17.70pct/+2.28pct/-4.29pct, respectively.

The summer tourism market is booming, and external traffic continues to improve. From January to July '24, the cumulative number of visitors to Huangshan Scenic Area reached 2.6214 million, +3.4%; of these, the number of visitors entering the mountain in July was 0.4818 million, +8.5% over the same period. The number of visitors entering the mountain continued to increase during the peak season. Following the opening of the Chihuang High Speed Rail in April, the G8388 Huan-Shanghai High Speed Rail train opened in June, passing through Huangshan West and Huangshan North Railway stations, and connecting the four provinces and cities of the Yangtze River Delta. At the end of August, the Shanghai Railway Administration launched the “Hangzhou+Qiandaohu+Huangshan” 7-day 3-city high-speed rail meter product. Improvements in external transportation are expected to continue to drive an increase in the number of visitors.

The renovation of the Mountain Hotel and the construction of the Donghuangshan Ropeway are imminent, which is expected to increase the carrying capacity of the scenic area. The 24H1 Beihai Hotel environmental remediation project has completed 70% of the basic façade construction, and more than 50% of the guest rooms have completed pre-buried mechanical and electrical pipelines and basic decoration construction. Mountain hotels are in short supply, and the Beihai Hotel is expected to greatly increase its capacity after it is put into use. The Donghuangshan Cloud Valley Ropeway project continues to promote construction and is expected to be officially put into operation in 2025. At that time, it will increase the overall carrying capacity of Huangshan Mountain and open up the peak season growth ceiling.

valuations

In the medium to long term, the carrying capacity of scenic spots is gradually increasing, and various businesses can be expected to continue to improve and increase; in view of the pressure on the company's performance in the short term, we adjusted the company's 24-26 EPS to 0.53/0.63/0.67 yuan, corresponding price-earnings ratio of 19.8/16.7/15.7 times, respectively. Maintain an increase in holdings rating.

The main risks faced by ratings

The recovery in passenger flow fell short of expectations, the progress of hotel renovation fell short of expectations, and the risk of natural disasters.