Incident: On October 30, the company released its 2024 three-quarter report. In the first three quarters of 2024, it achieved revenue of 7.048 billion yuan/YoY +4.65%, net profit to mother 0.153 billion yuan/YoY -25.77%, net profit of 0.153 billion yuan/YoY. Among them, 2024Q3 achieved revenue of 2.697 billion yuan/YoY +5.51%, net profit attributable to mother 0.08 billion yuan/YoY -19.29%, net profit not attributable to mother 0.079 billion yuan/YoY -15.56%.

Travel agency business revenue increased sharply in the first three quarters. In the first three quarters, 1) Travel agency business: Revenue increased sharply over the same period last year, mainly because the company continued to seize exclusive resources, enrich the supply of high-quality travel, maintain strong market competitiveness, entry visas progressed steadily, and exit visa turnover continued to grow. 2) Scenic area business: ① Wuzhen Scenic Area received 5.9934 million/ -2.68% of visitors, of which Dongzha received 1.6958 million/ -7.21% year-on-year, and Xizha received 4.2976 million visitors, the same year-on-year; Wuzhen Company achieved revenue of 1.325 billion yuan/-4.36% YoY, and achieved net profit of 0.265 billion yuan/YoY -20.32%. ② Gubei Water Town Scenic Area received 1.0025 million/ -10.55% YoY. Revenue of 0.429 billion yuan/year over year was achieved, there was little room for compression of superimposed fixed costs, and operating performance continued to be under pressure. The scenic area business is mainly due to factors such as the spillover of consumer demand from the surrounding travel market and the decline in the popularity of scenic spots in the suburbs of Beijing. 3) Integrated marketing business: Achieved revenue of 1.323 billion yuan/-5.46% year over year, and achieved net profit of 0.024 billion yuan, a significant increase over the previous year, mainly due to strengthened management and increased gross margin. 4) Hotel business: Achieved revenue of 0.234 billion yuan/-26.61% year over year, and net profit remained flat year over year. The decline in revenue was mainly due to the shutdown of some loss-making stores. 5) Strategic business: Chuangge Technology achieved revenue of 2.574 billion yuan and net profit of 0.039 billion yuan, which was basically the same as the previous year.

Taken together, the company's revenue for the first three quarters was +4.65% to 7.048 billion yuan, and Q3 revenue was +5.51% year-on-year to 2.697 billion yuan.

Q3 Gross margin declined, and expense ratios improved. 2024Q3, 1) Gross profit ratio: -3.8 pct to 23.5% year on year; 2) Expense rate for the period: Sales/ Management/ Finance Expenses Ratio: +0.0/ -0.9/-0.7 pct to 8.5%/5.8%/2.0%, respectively. The decline in gross margin and the increase in sales expenses were mainly due to the company's year-on-year increase in labor, marketing, operation and maintenance costs to improve the exhibition function and travel service business space, and the company is also continuously optimizing cost and cost control, so management and financial expenses have decreased. 3) Investment income: The year-on-year ratio was -1.0pct to 0.1%, mainly due to a decrease in investment income from joint ventures and joint ventures. 4) Credit impairment loss: Loss reduced by 111.5% year over year, or reversal of impairment calculated previously. Taken together, 2024Q3's net profit to mother was -19.3% to 0.08 billion yuan, and net profit margin to mother was -0.9 pct to 3.0% year over year.

Multiple projects continue to explore innovation. Based on the long-term development judgment of the cultural tourism market, the company continues to explore the content space of products in segments such as scenic spots, travel services, integrated marketing, and hotels, expand consumption scenarios, improve service quality, and use new media to broaden channels and traffic entrances. Among them: 1) Scenic area business, innovation in Wuzhen's heritage, fashion methods further explore traditional cultural heritage, and launch Wuzhen Mid-Autumn Festival “Walk” Moon themed events, Xizha Music Festival, Jiangnan Water Festival, Patio Lounge, Wucun Market, etc. and performance season; Gubei Water Town Scenery The district enriches the “City of Light” cultural IP through various forms such as concerts, light shows, concerts, food festivals, etc., integrating various elements such as music, light and shadow, Great Wall culture, and outdoor activities, and increasing marketing capabilities; 2) Non-scenic area business: integrating marketing business to seek service opportunities for national home diplomacy and high-level government meetings; travel agency business enhances product quality and introduces new businesses such as entry visas; and the landscape hotel business promotes the upgrading of integrated cultural tourism products and services.

Investment advice: As the only listed travel company with the development background of a major central financial holding group, China Youth Travel has diversified businesses such as travel agencies, scenic spot management, integrated marketing, hotels, and IT-related businesses. The company has excellent scenic spot operation capabilities. The scale of the travel agency business has resumed rapid growth with inbound and outbound travel, and its leading position in the integrated marketing industry continues to be consolidated. Due to the decline in revenue from many businesses other than the travel agency business in the first three quarters, the fourth quarter was a low travel season, and the company continued to improve the exhibition function and travel service business space at scenic spots. Labor, marketing, operation and maintenance costs increased year-on-year. The company is expected to achieve revenue of 10.1/10.8/11.5 billion yuan in 2024-2026, and net profit of 0.14/0.2/0.29 billion yuan. The current stock price corresponds to PE52x/38x/26x.

Risk warning: 1) The recovery of passenger flow and customer orders in scenic spots fell short of expectations; 2) the recovery of outbound group tours fell short of expectations; 3) competition in the industry intensified.