The company released its 2024 semi-annual report. 24H1 achieved revenue of 4.351 billion yuan/yoy +4%, a recovery of 74% compared to 2019, achieved net profit of 0.073 billion yuan/yoy -32% from year 19, after deducting net profit of 0.074 billion yuan/yoy -26% from year 19, and a recovery of 29% over 2019, mainly due to the year-on-year increase in labor, depreciation and amortization costs; single 24Q2 achieved revenue of 2.428 billion yuan/ Yoy -4%, a recovery of 73% compared to 2019, achieved net profit of 0.102 billion yuan/yoy -9%, recovery rate of 32% compared to 2019, net profit after deducting non-return to mother was 1.02/yoy -5%, and 50% recovery compared to 2019.

By business:

1) Wuzhen Scenic Area: 24H1 achieved revenue of 0.859 billion yuan/yoy +2%, and achieved net profit of 0.153 billion yuan/yoy -20%, a recovery of 65% compared to 19. The decline in net profit was mainly due to fixed costs such as depreciation. The 24H1 Scenic Area received a total of 3.8275 million/yoy +8%, a recovery rate of 86% compared to 2019. Among them, Dongzha received 1.1057 million/yoy +3%, and Xizha received 2.7218 million/yoy +10%.

2) Gubei Water Town: 24H achieved revenue of 0.275 billion yuan/yoy -22%, a recovery rate of 65% compared to 2019, with a recovery rate of 0.6004 million/yoy -12%, and a recovery rate of 60% compared to 2019. The main reason is that Gubei Water Town continues to be affected by factors such as the decline in the popularity of scenic spots in the suburbs of Beijing and the spillover of consumer demand in the surrounding travel market. The decline in scenic area revenue, compounded by factors where there is less room to reduce fixed costs, continues to put pressure on the business performance of the scenic area. However, during the period, the Gubei Water Town Scenic Area continued to focus on exploring unique resources and cultural and historical heritage, and launched a series of cultural tourism integration activities to enhance the transformation of inbound passenger flows into Beijing, and the subsequent effects were continuously observed.

3) The 24H1 travel agency's business revenue increased dramatically year-on-year. During the period, the company promoted the development of specialty products and led boutique tourist routes in the market segment around the three themes of “research travel”, “cultural tourism”, and “red tourism”; on the basis of maintaining industry leadership, the company's exit visa business continued to expand in scale and efficiency, and the overseas entry visa business also expanded steadily.

4) The strategic investment business (IT product sales and technical services) achieved revenue of 1.647 billion yuan/yoy -6%, achieved net profit of 24.34 million yuan, and maintained stable operation with good channels and inventory turnover capacity.

In addition, the overall business of China Youth Expo Union remained stable. Some projects were affected by industry policies and the revenue scale was reduced or postponed. 24H1 achieved operating income of 0.781 billion yuan/yoy -13%, and net profit was slightly profitable. Although Shanshui Hotel's revenue fell 24% year on year to 0.15 billion yuan due to the closure of some loss-making stores, net profit decreased year-on-year, and the business trend was positive.

Profit forecasting and investment suggestions: The company maintains integrity and innovation around changes in consumer demand, grasps the recovery and optimization of the dominant stock business, and plans the layout for incremental business expansion. We expect the company's revenue for 2023-2025 to be 10.8/12/13.2 billion yuan, up 12%/11%/10% year on year, and net profit to mother of 0.295/0.376/0.438 billion yuan, respectively, up 52%/27%/16% year on year. The current stock price corresponding PE is 23/18/15X, respectively, maintaining the “recommended” rating.

Risk warning: the risk of macroeconomic fluctuations, the risk that passenger flow recovery falls short of expectations, and the risk that consumption power recovery falls short of expectations.