Incident: China Youth Travel Service released its 2024 semi-annual report. In the first half of 2024, we achieved operating income of 4.351 billion yuan, an increase of 4.12% year on year; realized net profit of 0.073 billion yuan, a decrease of 31.84% year on year; realized net profit without deduction of 0.074 billion yuan, a decrease of 26.26% year on year.

The Wuzhen Scenic Area is growing steadily, and Gubei Water Town's performance is being pressured by the decline in the popularity of Beijing outings. In the first half of 2024, Wuzhen Scenic Area received a total of 3.8275 million visitors, an increase of 7.87% over the previous year. Among them, Dongzha received 1.1057 million visitors, up 2.64% year on year; Xizha received 2.7218 million visitors, up 10.16% year on year.

Wuzhen achieved revenue of 0.859 billion yuan in the first half of the year, up 2.20% year on year, and realized net profit of 0.153 billion yuan. Affected by fixed costs such as depreciation, a year-on-year decrease of 19.82%. Gubei Water Town received 0.6004 million visitors, a year-on-year decrease of 11.50%; achieved revenue of 0.275 billion yuan, a year-on-year decrease of 21.72%; compounded by factors where there was little room to reduce fixed costs, the operating performance of the scenic area continued to be under pressure due to factors such as the decline in the popularity of scenic spots in the suburbs of Beijing and the spillover of consumer demand from the surrounding tourist market.

The travel agency business has been accompanied by an increase in the recovery performance of the outbound travel market. In the first half of 2024, the travel agency business achieved a significant year-on-year increase in revenue. On the basis of maintaining industry leadership, the exit visa business continues to expand in scale and efficiency. The overseas entry visa business has been steadily expanding. The Philippine Visa Center has been profitable since it opened at the beginning of the year, preparations for the Israel and Saudi visa centers are progressing in an orderly manner, and they have won the bid for the four-city visa service center project in the UK to promote high-quality opening up to the outside world. The company strengthens the “wholesale+retail” and “online+offline” layout, accelerates the construction of a national sales network and strengthens new media channels, and accelerates customer base coverage.

Investment advice: The company is expected to achieve revenue of 10.971/12.787/13.867 billion yuan and net profit to mother of 0.303/0.386/0.458 billion yuan in 2024-2026, corresponding to 22.3/17.5/14.8 times PE, maintaining an “increase” rating.

Risk warning: Extreme weather affects travel, industry competition intensifies, and outbound travel repairs fall short of expectations.