The company released three quarterly reports, achieving revenue of 0.636 billion yuan/yoy -1% in the first three quarters of 24, achieving net profit of 0.192 billion yuan/yoy -9%, net profit of 0.192 billion yuan/yoy -11%; in a single Q3, revenue of 0.251 billion yuan/yoy +0.6%, net profit of 0.08 billion yuan/yoy -12%, net profit of non-return to mother 0.08 billions/yoy -10%. The company's net profit declined in 24Q3, mainly due to the trial operation of the Indigo Hotel Lugu Lake starting July 30, 2024. The start-up fee of 10.41 million yuan was included in the current profit and loss.

The 24Q3 company's gross margin was 66.2% /yoy+3.9pct, sales expenses ratio was 4.0% /yoy +1.0%, and management expense ratio was 19.4% /yoy +5.8%. Taken together, the company's net profit margin for 24Q3 was 31.9%, down 4.5 pct from 23Q3.

In September 2024, the company announced adjustments to the investment scale of the Yakniuping Tourist Ropeway renovation and expansion project. The ropeway was put into operation in 1999. The company plans to renovate and expand it in 2017. The total investment amount is estimated at 0.295 billion yuan, and the total investment amount has now been increased to 0.532 billion yuan. It is estimated that after the renovation, the ropeway capacity will increase from the current 360 people per hour to 1,900 people per hour. The average annual revenue is expected to be 0.107 billion yuan and the average annual net profit is 33.48 million yuan during the 15-year calculation period.

Profit forecast and investment suggestions: We are optimistic about the sustainability of the demand driven boom in the scenic area industry. We are optimistic about the company's leading tourism position in northwest Yunnan. The company has high-quality tourism resources such as Yulong Snow Mountain, Shangri-La, and Lugu Lake in Lijiang. The improvement of surrounding traffic and supply optimization in the scenic area are driving long-term growth. We expect the company to achieve revenue of 0.808/0.881/0.934 billion yuan in 2024-2026, yoy +1%/+9%/+6%, and achieve net profit to mother of 0.216/0.248/0.268 billion yuan, yoy -5%/+15%/+8%. The PE corresponding to the current stock price is 23/20/18X, maintaining the “recommended” rating.

Risk warning: risk of macroeconomic fluctuations, risk of natural weather changes, risk of project construction falling short of expectations.