The company released its 2024 semi-annual report. 24H1 achieved revenue of 0.263 billion yuan, -6.93% YoY; net profit to mother 0.053 billion yuan, or -15.81% YoY. The company's performance is under pressure in the short term. In the medium to long term, we are optimistic that the construction of each project will gradually improve, contribute to the increase in performance, and maintain the purchase rating.

Key points to support ratings

Q2 There was a slight decline in performance. 24H1 achieved revenue of 0.263 billion yuan, -6.93% year over year; net profit to mother 0.053 billion yuan, -15.81% year over year; net profit after deducting non-return to mother 0.051 billion yuan, -14.34% year over year.

Among them, 24Q2 achieved revenue of 0.157 billion yuan, -3.68% year on year; net profit to mother 0.042 billion yuan, -3.87% year over year; net profit after deducting non-return to mother 0.041 billion yuan, or -2.23% year on year. Q2 Performance declined slightly. On the one hand, we expect the middle and high-end vacation market to be impacted by the loss of spending power; on the other hand, it is expected to be affected by the diversion of long-term travel and outbound travel.

The expense ratio increased slightly, and the gross profit margin and net interest rate remained basically the same in Q2 compared to the same period last year. The gross margin of 24H1 company was 52.18%, -1.50pct year on year, the net margin was 23.58%, and the year-on-year -2.27pct; of these, 24Q2 gross margin was 61.77%, and the net margin was 30.76%, which was basically the same as the previous year. 24H1's sales/management expense ratios were 6.36% and 14.82%, respectively, +0.18pct/+1.04pct year-on-year, respectively.

The performance of various businesses is divided, and the hotel business is under relative pressure. The 24H1 scenic spot/spa/hotel/travel agency business achieved revenue of 1.51/0.023/0.075/0.087 billion yuan, respectively, -12.79%/-2.39%/-19.62%/-13.99%, year-on-year; gross margin was 61.75%/26.23%/30.57%/0.09%, respectively, year-on-year

+3.19pct/+3.39pct/-5.72pct/-0.06pct.

Project construction is progressing steadily, and there is room for medium- to long-term growth to be expected. By the end of June, the Nanshan Xiaozhai Phase II project had invested 0.44 million yuan in capital raising, accounting for 0.19% of the investment. It has now completed pre-construction plan approval and land listing procedures, and is expected to be ready for use in December '25.

On June 17, 2024, the company signed a cooperation agreement with the Tianmu Lake People's Government to officially develop Pingqiao Shiba Park, which will be linked to its three major scenic spots; the overall planning of the Yushui Hot Spring Phase III project has entered the land resource reserve stage. The gradual improvement of the construction of various projects in the medium to long term is expected to contribute to increased performance.

valuations

Considering the overall pressure on the hotel market this year, and the diversion of short-term travel destinations to a certain extent, the company's operations were impacted. We adjusted the company's 24-26 EPS to 0.59/0.67/0.76 yuan, corresponding price-earnings ratio of 16.9/14.9/13.1 times. We are still optimistic about the increase in performance brought about by state-owned holdings boosting the company's epitaxial expansion in the medium to long term. Maintain a buy rating.

The main risks faced by ratings

Security risks, risks of projects falling short of expectations, and industry competition risks.