The company released its 2024 semi-annual report:

(1) In the first half of 2024, the company achieved operating income of 2.617 billion yuan/ +230.25%, mainly due to rapid growth in the company's business volume; realized net profit attributable to mother 0.072 billion yuan/ +307.90%, net net profit after deducting 0.067 billion yuan/ +282.08%; net cash flow from operating activities was 0.421 billion yuan/ +9780.34%, mainly due to good customer repayment and advance payment conditions.

(2) With 2024Q2, the company achieved operating income of 1.592 billion yuan/ +143.25%, realized net profit of 0.044 billion yuan/ +1369.27%, and realized net profit of 0.039 billion yuan/ +1725.11% after deducting non-return to mother.

Gross margin has increased, and cost reduction and efficiency have turned losses into profits:

(1) In the first half of 2024, the company's gross profit margin was 13.07% /+2.06pcts, sales/management and R&D expenses were 7.42%/1.90%, -3.52pcts/-3.72pcts, and the net interest rate achieved 2.74% /+7.10pcts. The results of cost reduction and efficiency were remarkable, and the net interest rate was corrected year-on-year.

(2) 2024Q2's gross profit margin was 11.90% /+1.40pcts, sales/management and R&D expenses were 6.83%/1.53%, respectively, -1.51pcts/-2.28pcts year-on-year, with a net profit margin of 2.75% /+2.29pcts.

The tourism market continues to pick up, and the peak tourist season can be expected in the second half of the year:

In the first half of 2024, China's tourism market continued to pick up, the optimization of entry and exit policies stimulated market vitality, and the tourism economy took on a new climate. The company closely follows the market pulse, optimizes the product structure, deepens stock and develops incremental markets, and the total order volume is growing rapidly. At the same time, operational efficiency and cost control have been strengthened, and profitability has been steadily improved. The company firmly establishes the layout of the entire industry chain, consolidates control over upstream and downstream resources, and cooperates with multinational tourism administrations to organize promotion activities, such as with Argentina and Malta, to promote international tourism exchanges. On the channel side, the company launched the “Zhongxin Manufacturing 2.0” series, which focuses on differentiated customized tours. More than 90% of the first batch of over 500 products are exclusive to meet the high-quality travel needs of tourists. Looking at the second half of the year, the travel market ushered in a peak season. Combined with the further recovery of international flights and the release of production capacity, the company is expected to further grow its outbound travel business under the heat of the market.

The Hangzhou Axin platform helps industrial chain collaboration, and user activity and transaction volume have increased significantly:

In the first half of 2024, the company's shareholding company, the Hangzhou Axin Platform, continued to empower the industrial chain, promote cross-channel and cross-regional resource sharing, reduce costs, and improve efficiency. User activity and turnover both increased in the first half of the year. Registered travel consultants and stores increased 35% compared to the end of 2023, the number of product routes reached 3,000, the monthly transaction peak was 40 million, and payment GMV surged 779% year over year. In the second half of the year, Hangzhou Axin will focus on resource supply, deepen the integration of outbound travel products, connect to multiple categories of online supply, and expand the domestic travel market. At the same time, through refined operation and supply matching, user stickiness is enhanced, transaction efficiency is improved, and market position is further consolidated.

Investment advice:

Buy-A investment rating. We expect the company to achieve operating income of 7.089/10.824/12.376 billion yuan from 2024 to 2026, or 114.9%/+52.7%/+14.3% year over year; net profit to mother 0.15/0.245/0.334 billion yuan, +363.3%/+64.1%/+36.3% year over year. A buy-A investment rating is given, with a target price of 7.61 yuan for 6 months, corresponding to 50xPE in 2024.

Risk warning: macroeconomic fluctuations, tourism market recovery falling short of expectations, business development falling short of expectations, etc.