Core views:

According to the company's three-quarter report, in the first three quarters of 2024, the company achieved operating income of 0.595 billion yuan, a year-on-year increase of 19.55%, a year-on-year net profit of 0.148 billion yuan, a year-on-year decrease of 2.52%, after deducting non-return net profit of 0.156 billion yuan, an increase of 3.63% over the previous year.

According to estimates, 24Q3 achieved operating income of 0.34 billion yuan, a year-on-year increase of 3.19%, a year-on-year net profit of 0.127 billion yuan, a year-on-year decrease of 9.04%, after deducting non-return net profit of 0.128 billion yuan, a year-on-year decrease of 7.41%.

The gross margin declined year on year, and the period expense ratio increased slightly. The company's 24Q3 gross margin was 57.9%, a year-on-year decrease of 5.37pp. The cost rate for the period was 7.09%, an increase of 0.65pp over the previous year. The year-on-year decline in gross margin was mainly due to the closure of scenic spots affected by the typhoon during the peak summer season from the end of July to the beginning of August. At the same time, repeated bad weather also had a certain impact on the company's hotel room prices and occupancy rates, which put pressure on gross margin.

In terms of passenger flow, according to the Changbai Mountain Management Committee, the total number of visitors to the main scenic area of Changbaishan in the third quarter of 2024 was 1.678 million, an increase of about 6% over the previous year. During the 11th National Day in 2024, the main scenic area of Changbai Mountain received 0.1818 million visitors, an increase of 18.1% over the previous year. According to a report from the Chinese Government Network, on October 25, the National Assembly will deploy relevant measures to stimulate the economic vitality of snow and ice through high-quality development of snow and ice sports. It is necessary to further expand the mass base of snow and ice sports and develop differentiated and characteristic snow and ice tourism according to local conditions.

Profit forecasting and investment advice. The company is expected to achieve net profit of 0.172, 0.214, and 0.259 billion yuan respectively in 24-26, with year-on-year growth rates of 24.2%, 24.9%, and 20.9%, respectively. Referring to the industry average valuation, and considering the increase in passenger traffic after the opening of the Shenbai High Speed Rail in '25 and the company's long-term benefits from the snow and ice tourism craze, the company was given a 25-year 50XPE valuation. The corresponding reasonable value was 40.18 yuan/share, maintaining a “buy” rating.

Risk warning. Macroeconomic fluctuations; risk of falling passenger traffic due to weather factors; risk of restrictions on fees for tickets, heating, etc.