Introduction to this report:

The ticket subsidy has an impact on the company's profitability. Focus on peak season passenger flow.

Key points of investment:

Investment advice: Considering the impact of ticket subsidies on the company's profitability, the company's 2024-2026 EPS forecast was lowered to 0.54 (-18%) /0.57 (-21%) /0.6 (-22%) yuan, respectively. Considering the industry average valuation of 27xPE, the target price was lowered to 14.55 yuan (-13%) to maintain the holding increase rating.

Performance summary: 24H1 revenue of 0.834 billion yuan/ -0.39%, gross profit of 0.419 billion yuan/ -5%, gross profit margin of 50.21% /-2.47pct, profit margin of 0.132 billion yuan/ -34%, profit margin 15.78% /-8.08pct, net of non-return mother 0.125 billion yuan/ -38%, profit margin 14.93% /-9.13pct; 24Q2 company revenue 0.498 billion yuan/ -0.36% , gross profit 0.286 billion yuan/ +2.23%, gross profit margin 57.47% /+1.45pct, tax and additional/sales/management/R&D/finance expense ratio +1.58/+1.21/+2.4/+0.13/-0.26pct, profit margin of 0.106 billion yuan/ -21.49%, profit margin 21.33%/-5.74pct, net of non-return mother 0.102 billion yuan/ -27.66%, profit margin 20.52% /-7.74pct , mainly due to a decrease in the number of valid ticket purchasers during the reporting period and the impact of continued heavy rainfall in late June;

Ticket exemptions may have an impact on profitability. 24H1 visitors entering the mountain +2.29% year over year; the ropeway and cable car business received +1.06% of visitors. The ride rate declined slightly from 1.99 in 23H1 to 1.97, but the per capita consumption of the ropeway was 73.39 yuan/ +0.23%; hotel business revenue -3.09%; travel services were -1.36%; the scenic area business (garden development) was -15.95% year-on-year. It is expected that the impact of ticket exemptions and falling passenger flows from Taiping Lake and Huashan Caves (both are expected to be affected by the decline in passenger flow from Taiping Lake and Huashan Mysteries Caves) Total net profit increased losses year-on-year 9.09 million yuan); Huicai revenue +7.78%; 24H1 ropeway cableway/hotel/tourist service/scenic spot business/Huicai gross margin was 88.51/31.78/10.66/28.6/ 11.04%, respectively, and gross margin was +0.93/-2.72/+2.29/-17.7/-4.29pct, respectively. Among them, the gross margin of the scenic area business declined or was mainly affected by ticket business exemptions.

Later, focus on new projects and traffic improvements: ① The opening of the Chihuang High Speed Rail will promote passenger flow between Jiuhuashan and Huangshan, and will also drive the connection to the East China market. The completion of the Ningxuanhuang High Speed Rail is expected to drive passenger traffic in the Nanjing region; ② the tourism service business led by Tuma Technology is growing rapidly; ③ the construction of the second phase of the East Huangshan Project is progressing according to plan. Furthermore, Huicai Store is expected to accelerate the increase in the expansion of stores.

Risk Warning: Demand is weak, project approval falls short of expectations, and travel costs continue to rise