Core views:

Incident: The company released its quarterly report for 2014. In the first three quarters of 2024, it achieved revenue of 2.013 billion yuan, a year-on-year increase of 24.46%, and achieved net profit of 1.008 billion yuan, an increase of 28.04% year-on-year, after deducting non-return net profit of 0.994 billion yuan, an increase of 28.05% year-on-year.

According to estimates, the company achieved revenue of 0.836 billion yuan in the third quarter, a year-on-year decrease of 4.69%, and realized net profit of 0.457 billion yuan, a year-on-year decrease of 5.54%, after deducting non-return net profit of 0.446 billion yuan, a year-on-year decrease of 7.1%.

Looking at the cost ratio, the Q3 gross profit ratio was 75.64%, the year-on-year reduction of 2.15pp.Q3 fee rate was 10.79%, and management expenses increased a lot. Among them, the sales expense ratio was 5.39%, up 0.62pp year-on-year, mainly due to the increase in advertising investment in various scenic spots, and the management expense ratio was 4.99%, up 0.78pp year on year, mainly due to increased amortization expenses for accrued equity incentives. The R&D expense ratio was 1.26%, up 0.65pp year on year, and financial expenses ratio -0.85% year-on-year decrease 0.13pp.

Judging from the performance of various parks, the Foshan and Three Gorges New Parks, which were newly opened this year, performed well. According to the Songcheng Performing Arts website, during the National Day Golden Week in '24, the company received more than 2.6 million visitors, an increase of 59.7% over the previous year. A total of 481 shows were performed, with a maximum of 95 shows in a single day. By project, the retail rate of Songcheng, Hangzhou reached 72%; “Song Cheng Through the Ages” performed 69 shows during the National Day; a total of 86 shows, 17 shows in multiple days; the Guangdong Foshan Project had a total of 47 shows, with a retail visitor rate of 87%; and the asset-light project Three Gorges Scenic Area performed 9 shows on a single day for multiple days, once again breaking many records such as the number of large-scale tourist shows and audience numbers in Hubei.

Profit forecasting and investment advice. The company is expected to achieve net profit of 11.1 and 12.91.46 billion yuan in 24-26, with an increase of 16.2% and 13.1% respectively in 25-26. Referring to comparable companies, a 24-year 26 XPE valuation is given, corresponding to a reasonable value of 11.00 yuan/share, maintaining a “buy” rating.

Risk warning. The risk of macroeconomic fluctuations, a slowdown in the growth rate of stock projects, the risk of new project launches and profits falling short of expectations, and the risk of safety accidents.