Introduction to this report:

Revenue expectations were slightly lower, and the profit side was in line with expectations. Core markets picked up in October, and the long-term focus was on the recovery and upward progress of the travel agency industry.

Key points of investment:

Investment advice: Considering that the new construction project is still in the climbing phase, the 2024-2026 EPS will be lowered to 0.4 (-5%) /0.44 (-12%) /0.5 (-12%) yuan. Considering the 2025 industry average of 26xPE, the target price will be raised to 11.52 yuan (+9%) to maintain the increase rating.

Performance summary: 24Q1-3 achieved revenue of 2 billion yuan/ +24.46%, gross profit of 1.4 billion yuan/ +25.18%, net profit of 1 billion yuan/ +28.04%, after deducting 0.99 billion yuan/ +28.05%; single 24Q3 achieved revenue of 0.836 billion yuan/ -4.69%, compared with 19Q3 +5.99%, gross profit of 0.632 billion yuan/ -7.32%, gross profit margin 75.64% /- 21.14pct, year-on-year, 19-4.23pct; tax and additional/sales/management/R&D/finance expense ratio +0.98/0.62/0.78/0.64/-0.13pct; profit to mother 0.457 billion yuan/ -5.54%, year-on-year 19Q 3-5.67%, profit margin 54.72%/-0.49pct, year-on-year 19q3-6.75pct, net of 0.446 billion yuan/ -7.1% year-on-year, profit margin 3-6.55% year-on-year 53.39%/-1.39pct, compared with 19q3-7.16pct.

Revenue was slightly lower than expected, and the profit side was in line with expectations. Slightly lower revenue expectations (expected year-on-year increase in revenue) are mainly driven by new projects to achieve significant year-on-year increase (estimated total project volume +27%, and the opening of the Three Gorges and Foshan). Considering the pressure on actual customer orders and occupancy rates, the profit side is in line with expectations (expected to decline by a high single digit year over year) mainly due to the number of core markets (Hangzhou+Sanya+Lijiang+Guilin+Zhangjiajie) -14% compared to 2023. The structural drag on profit levels, taking into account the new contribution of the Foshan project (50 million profit in the first half of the year) and the gradual rise in Shanghai and Xi'an 7% deduction The decline was largely in line with expectations; in addition, the reduction in contract liabilities and ongoing construction was mainly due to confirmation of design planning costs brought about by the Three Gorges Project and the consolidation of the Foshan project.

The core market picked up in October, and the long-term focus is on the recovery and climbing progress of the travel agency industry. Core events in October (Hangzhou+Sanya+Lijiang+Guilin+Zhangjiajie) recovered to 80% in 2019 and 115% in 2023. From July to September, the recovery returned to 88/99/ 62% in 2019 and 87/86/ 87% in 2023, respectively, with a significant increase in month-on-month recovery; considering that the one-time settlement of the Three Gorges Ancient Love Project in 2024 brought in revenue exceeding 0.13 billion yuan, the base is relatively higher in 2025; focus on the pace of recovery in the travel agency industry, core projects and Profits from heavy asset projects in Foshan/Xi'an/Shanghai have rebounded, and actual customer orders and discounts have narrowed. In addition, the progress of projects in Zhuhai and Thailand also requires attention.

Risk warning: Continued impact of the epidemic, unforeseen safety incidents, and the iterative impact of new scenarios.