Description of the event

With 2024H1, the company achieved operating income of 0.834 billion yuan, -0.39% year on year; realized net profit of 0.132 billion yuan, or -34.1% year on year; realized net profit of 0.125 billion yuan without return to mother, or -38.17% year on year.

With 2024Q2, the company achieved operating income of 0.498 billion yuan, -0.36% year over year; realized net profit of 0.106 billion yuan, or -21.49% year over year; realized net profit deducted from non-mother 0.102 billion yuan, -27.66% year over year.

Incident comments

At the management level, the number of visitors received increased slightly over the same period last year, and brand promotion efforts were strengthened. Affected by continued heavy rainfall in late June this year, Huangshan Scenic Area received a slight year-on-year increase in the number of visitors in the first half of 2024. 2024H1, Huangshan Scenic Area received a total of 2.1396 million visitors, an increase of 2.3% over the previous year. The ropeway and cable car carried 4.2098 million visitors, an increase of 1.06% over the previous year.

In 2024, the company accurately formulated various preferential policies according to population groups, extended its marketing reach, continued to increase marketing efforts in the customer source market, developed special markets such as large-scale teams, parent-child research, health and vacation, conferences and exhibitions, innovatively launched festivals, spring-themed events, etc., and continued to optimize the new media communication matrix. Through accurate marketing efforts, it is expected that the number of visitors received will increase sequentially in the second half of the year.

At the level of profitability, the year-on-year pressure was under pressure due to various factors. 2024H1, due to a decrease in the number of valid ticket purchasers and continued heavy rainfall in late June, the company's revenue declined year on year. At the same time, there were recoverable losses in the same period last year, and income tax expenses increased year on year. Under the influence of two factors, the company's profitability was under pressure. In the first half of 2024, the company's sales expense rate/management expense rate/ financial expense rate/ R&D expense ratio were 2.82%/20.23%/-0.15%, +0.94/+1.27/-0.18/+0.15pct, and the overall period expense ratio was 23.05%, +2.18pct year on year; gross sales margin and net sales margin were 50.21%/17.56%, respectively.

The global layout continues to advance, and project construction is proceeding in an orderly manner. In the first half of 2024, the company seized the construction opportunities of Dahuangshan Mountain. On the one hand, it promoted the upgrading of the Taiping Lake Scenic Area business format, improved the Huashan World Night Tour brand, and put the Taiping Lake Manxinfu Hotel into operation; on the other hand, the company's Huishang hometown brand Hefei Luogang Park Store officially opened and accelerated the construction of three other stores under construction; at the same time, the company promoted new cultural, creative and new retail formats, and continued to open offline stores with the “Huangshan Hao Li” theme. In addition, the company continues to improve infrastructure construction and promote the Beihai Hotel environmental remediation and renovation project, the Tangquan Hotel renovation project, and the Huangshan International Hotel upgrade project in an orderly manner.

Profit forecast and investment advice: Optimistic companies will benefit from multiple benefits such as improved traffic conditions, hotel project transformation, and catering business model upgrades to achieve a steady increase in revenue performance. In 2024, with the opening of the Chihuang High Speed Rail, passenger flow into the mountains is expected to further improve; the volume and price are expected to rise again with the renovation and upgrading of hotels on the mountain; in the restaurant sector, new stores in Huishang's hometown sector mature one after another and explore the expansion of asset-light models, which is expected to reduce the drag on the company's performance. The company's net profit for 2024-2026 is estimated to be 0.434/0.518/0.558 billion, respectively, and the corresponding PE is 17.82/14.93/13.85X, respectively, maintaining a “buy” rating.

Risk warning

1. Passenger flow recovery falls short of expectations;

2. Huicai's expansion is progressing slowly;

3. The pace of improvement of the hotel sector project falls short of expectations.