The company released its report for the third quarter of 2024:

(1) In the first three quarters of 2024, the company achieved operating income of 4.723 billion yuan/ +130.05%, mainly due to the rapid growth of the company's business volume; achieved net profit of 0.123 billion yuan/ +773.86%, net profit after deducting non-return to mother of 0.118 billion yuan/ +1055.73%; net cash flow from operating activities was 0.494 billion yuan/ +344.78%. The main reason was that the company's industry was developing well, and customer repayment and advance payments were relatively good.

(2) With 2024Q3, the company achieved operating income of 2.106 billion yuan/ +67.06%, net profit due to mother 0.052 billion yuan/ +6.31%, net profit not attributable to mother 0.051 billion yuan/ +8.74%.

The gross margin has been rising steadily, and the cost side is relatively stable:

(1) In the first three quarters of 2024, the company's gross profit margin was 13.04% /+1.55pcts, sales/management and R&D expense ratios were 7.50%/1.91%, +0.33pct/-1.70pcts year-on-year, and 2.60% /+1.92pcts.

(2) 2024Q3's gross profit margin was 13.01% /+1.12pcts, sales/management and R&D expense ratios were 7.61%/1.92% respectively, +2.80pcts/-0.45pcts year-on-year, with a net profit margin of 2.47%/-1.42pcts.

The recovery of outbound travel is accelerating, and tourists' demand is shifting to high-quality experiences:

Group Vice President Cao Jian proposed at the China Outbound Travel Fair that the recovery of China's outbound travel market is characterized by gradual release from near and far. With the resumption of Air China flights and the implementation of the visa-free policy, many parts of the world have become popular choices for Chinese tourists. Tourist demand is shifting from simple sightseeing tours to pursuing high-quality cultural and cultural experiences. Single-destination tours are gradually replacing multi-country connected tours. The length of travel has also been extended in the context of in-depth experiences, and travel methods are becoming more and more diverse and fragmented. The company responds positively to changes in the travel market by optimizing the product structure and expanding destination resources, such as launching MSC Mediterranean Cruises 2026 global routes.

Accelerate the layout of stores across the country and build a digital industrial chain:

The company's retail brand Zhongxin Youyou received 50 million yuan in pre-A round of financing in 2024. It has been fully deployed in 20 provinces, cities and autonomous regions across the country, and plans to reach 5,000 stores by the end of 2026. Currently, Zhongxin Youyou relies on B-side travel partners and C-side marketing teams, combined with CITIC Travel Group's industry-leading products, and forms a strong market competitiveness through its own product system and extensive supplier network. In the future, the company will build digital stores and integrated digital marketing platforms to strengthen the retail model combining online and offline.

Investment advice:

Buy-A investment rating. We expect the company to achieve operating income of 7.087/10.824/12.376 billion yuan from 2024 to 2026, or 114.9%/+52.7%/+14.3% year over year; net profit to mother 0.15/0.245/0.334 billion yuan, +363.3%/+64.1%/+36.3% year over year. A buy-A investment rating is given, with a target price of 8.37 yuan for 6 months, corresponding to 55xPE in 2024.

Risk warning: macroeconomic fluctuations, tourism market recovery falling short of expectations, business development falling short of expectations, etc.