Description of the event

The company released its financial report for the third quarter of 2024. During the period, it achieved revenue of 1.412 billion yuan/ -1.58%, net profit due to mother 0.285 billion/ -30.15%, net profit not attributable to mother of 0.272 billion yuan/ -33.12%, and EPS 0.39 yuan.

Among them, 2024Q3 achieved revenue of 0.578 billion yuan/ -3.25%, net profit due to mother 0.153 billion yuan/ -26.35%, after deducting non-attributable net profit of 0.148 billion yuan/ -28.17%.

Incident reviews

The decline in the company's profit level during the period was mainly due to a decrease in the number of valid ticket purchasers, continued heavy rainfall in late June, and a year-on-year increase in recoverable losses and income tax expenses during the same period last year. Huangshan Scenic Area received a total of 3.6324 million/ +2.8% of visitors to Jinshan in 2024Q1-3, of which 1.4903 million/ +3.35% were received in 2024Q3.

During the period, the company's gross profit margin was 53.41% /-4.01pct, and the net profit margin was 22.15% /-8.72pct. The overall cost ratio is 20.85% /+2.7pct, of which the sales expense ratio is 2.76% /+0.93pct, the management expense ratio is 17.88% /+1.59pct, and the financial expense ratio is 0.08% /+0.04pct. Net cash flow from operating activities was 0.408 billion yuan/ -38.85%.

Investment advice

1) The company is blessed with natural resources, with Huangshan Scenic Area as the core, including first-class ecological resources such as Taiping Lake Scenic Area and Huashan Mysterious Cave Scenic Area, with an average of more than 10,000 visitors per day; 2) Currently, Huangshan City has entered the 1.5-hour economic circle of Hangzhou, Hefei and other cities, and the 2.5-hour economic circle of Shanghai, Nanjing and other cities. Subsequently, with the continuous improvement and operation of high-speed rail lines, convenient and unobstructed means of transportation for visitors to Huangshan; 3) The company is backed by the Huangshan State-owned Investment Platform, which has abundant free cash flow, good financial conditions, and smooth financing channels; 4) Continue to improve passenger flow hubs within the scenic area, It currently has the Huangshan Yungu Ropeway, Yuping Ropeway, Taiping Ropeway, and Xihai Sightseeing Cable Car, which will transport more than 9.5 million tourists in 2023. The company is currently building the Huangshan Dongdamen Ropeway, which is located in the Donghai Scenic Area of Huangshan Scenic Area and Tanjiaqiao Town in Huangshan District. It is expected to be completed within 2025. It is expected to further enrich Huangshan tourist route products and expand the capacity of the scenic area. We expect the company's 2024-2026 EPS to be 0.55\ 0.67\ 0.75 yuan respectively, corresponding to the company's closing price of 11.33 yuan on October 30, and PE of 20.8\ 16.9\ 15.2 times for 2024-2026, respectively, giving it an “increase in holdings -A” rating.

Risk warning

The risk that passenger flow recovery in scenic spots falls short of expectations; risk of macroeconomic policy changes.