Introduction to this report:

The performance was in line with expectations. The two towns continued to pick up, but the surrounding tourist flow was still under pressure, and the hotel business continued to lose money.

Key points of investment:

Investment proposal: Considering the pressure on surrounding tourism and the impact of new climbing projects, the 2024-2026 EPS forecast was lowered to 0.38 (-16%) /0.44 (-21%) /0.47 (-24%) yuan, respectively. Considering the industry average 22x PE, and considering that Wuzhen and Gubei are still in the restoration phase, the company was given 25xPE in 2025, and the target price was lowered by 10.88 (-16%) yuan.

Performance summary: 2024H1 achieved revenue of 4.35 billion yuan/ +4.12%, net profit of 0.073 billion yuan/ -31.84%, deducted from non-return mother 0.074 billion yuan/ -26.26%; of these, 2024Q2 achieved revenue of 2.428 billion yuan/ -3.66%, gross profit of 0.652 billion yuan/ -1.9%, gross profit ratio of 26.85% /+0.48pct, tax and additional/sales/management/R&D/finance expense ratio +0.16/+1.07/-0.02/+0.05/-0.49pct, profit margin 0.102 billion yuan/ -8.73%, profit margin 4.18%/-0.23pct, net non-return 0.102 billion yuan/ -5.23%, profit margin 4.2%/-0.07pct.

The two towns are still recovering, and the hotel business continues to reduce losses. 2024H1 Wuzhen's revenue is 0.859 billion yuan/ +2.2%, receiving 3.83 million visitors/+7.9%, customer unit price 224.43 yuan/ -5.26%, including Dongzha 1.11 million/ +2.6%, Xizha 2.72 millions/ +10.2%, net profit 0.153 billion yuan/ -19.82%, profit margin 17.81% /-4.89pct, mainly due to the opening of the Embankment Hotel, which increased the cost of non-employee costs Impact; Gubei Water Town revenue 0.275 billion yuan/ -21.72%, visitors 0.6 million/ -11.5%, customer unit price 458 yuan/ -11.55%, net profit loss 0.061 billion yuan, a year-on-year increase of 0.05 billion yuan; China Youth Expo Joint's revenue was 0.781 billion yuan/ -12.71%, slightly profitable; Shanshui Hotel's revenue was 0.15 billion yuan/ -24.41%, net profit loss 0.017 In billion yuan, losses continued to decrease year on year, mainly due to the shutdown of some loss-making stores and scale reduction; Chuangge Technology's revenue was 1.647 billion yuan/ -6%, and net profit was 0.024 billion yuan/ +3%.

The climbing slope of the hotel on the embankment is dragging down the profit side, and surrounding tours are still under pressure. The increase in fixed costs brought about by the opening of the Wuzhen Embankment Hotel has dragged down the profit side. In addition, Gubei Water Town was greatly affected by the diversion of passenger traffic in the suburbs of Beijing. Among them, the recovery of outbound travel and domestic long-distance travel was affected; the travel agency business is still in the repair stage, and the significant increase in revenue was mainly driven by an accelerated year-on-year recovery in inbound and outbound travel.

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