Introduction to this report:

The lower performance than expected is due to a decrease in the number of effective mountain entrants under ticket subsidies, a drag on profit margins, and concerns about the recovery of core projects.

Key points of investment:

Investment advice: Considering the impact of ticket subsidies on the company's profitability, the company's 2024-2026 EPS forecast was lowered to 0.42 (-22%) /0.46 (-19%) /0.49 (-18%) yuan, respectively. Considering the industry average of 25xPE in 2025, considering the company's scarce asset positioning, the target price was lowered to 13.66 yuan (-6%), and the target price was lowered to 13.66 yuan (-6%).

Performance summary: 2024Q1-3 achieved revenue of 1.412 billion yuan/ -1.58%, gross profit of 0.754 billion yuan/ -8.46%, mother profit 0.285 billion yuan/ -30.15%, after deducting non-return 0.272 billion yuan/ -33.12%; single 24Q3 achieved revenue of 0.578 billion yuan/ -3.25%, gross profit of 0.335 billion yuan/ -12.38%, gross profit margin of 58.04% /- 6.05pct, tax and additional/sales/management/R&D expense ratio +0.06/+0.92/+0.12/+0.37pct, period expense ratio 18.95% /+3.42pct, profit margin 0.153 billion yuan/ -26.36%, profit margin 26.52% /-8.32pct, net profit margin 0.148 billion yuan/ -28.17%, profit margin 25.55%/-8.86pct.

The lower than expected performance meant that the number of effective entrants to the mountain decreased, and profit margins were hampered. The Huangshan Scenic Area received 1.4903 million visitors in 24Q3, +3.35% compared to the same period, and 3.6334 million visitors in January-September, +2.8%. However, considering the increase in the company's free ticket exemption policy, the actual number of effective visitors to the mountain decreased year-on-year, and the profit side declined even more significantly due to high operating leverage; in addition, extreme weather from June also had an impact.

Later, focus on new projects and traffic improvements: ① The opening of the Chihuang High Speed Rail will promote passenger flow between Jiuhuashan and Huangshan, and will also drive the connection to the East China market. The completion of the Ningxuanhuang High Speed Rail is expected to drive passenger traffic in the Nanjing region; ② the tourism service business led by Tuma Technology is growing rapidly; ③ the construction of the second phase of the East Huangshan Project is progressing according to plan. Furthermore, Huicai Store is expected to accelerate the increase in the expansion of stores.

Risk Warning: Demand is weak, project approval falls short of expectations, and travel costs continue to rise