The cultural tourism scene continues to expand, and the rail transit industry map is being improved. The company started with R&D and manufacturing of stage machinery and equipment and rail transit interior seats. In recent years, it has relied on original hardware capabilities to actively expand cultural tourism scenarios, and is committed to enhancing cultural soft power. The company has carried out localized research and development of top technology for international sightseeing trains on the basis of deep cultivation of traditional business, and now has the same technical capabilities. In July 2024, the subsidiary Dafeng Rail Transit received a “Special Equipment Production License” for large-scale amusement facility manufacturing projects. Recently, the company won the bid for a sightseeing train procurement project for the Xiandieyan (Dasha) tourist facility upgrade project in Dongtou District, Wenzhou City. This marks another important step in upgrading the company's rail transit industry layout. In this project, in addition to participating in the construction of the main body of the sightseeing train, the company also built its intelligent train control system, safety protection and efficient control center to enhance the intelligent interaction and immersive experience of sightseeing trains with digital technology, making it a travel experience product with integrated business formats.

Deeply cultivate commercial cultural tourism operations and efficiently allocate available resources. The company has rich cinema resources and operational capabilities covering cultural, commercial and sports tourism, and has successfully built a series of influencer cultural landmarks and immersive experience projects. On this basis, the company can flexibly grasp various business trends, and has the following ideas in terms of business scenario operation: 1) Replicate and promote its own IP: the company continues to develop its own performing arts IP “Tonight Gongxixi”, which has now been successfully replicated in places such as Nanxun Ancient Town in Huzhou and Dongli Lake in Tianjin. In this immersive entertainment, visitors can try on Song Dynasty costumes, experience Song Dynasty folk customs, and purchase cultural and creative products to give full play to related consumption potential; 2) Integrate and link leading international IPs: The company integrates with leading international IPs such as “Secret Law No. 9” and “Forensic Medical Investigation Group” The linkage of leading IPs creates a suspenseful and immersive theater, Cross-border collaboration explores the derivative value of international IP; 3) Efficient use of theater resources: As of December 2024, the company is operating more than 20 venues, including the Hangzhou Jinsha Lake Grand Theatre and the Hangzhou Asian Games Museum, and is actively exploring and implementing diversified businesses such as repertoire performances, art festival curation, art education and art commercial development to achieve optimal allocation of theater resources.

Investment proposal: We expect the company to achieve operating income of 1.542/2.077/2.29 billion yuan and net profit to mother 0.076/0.123/0.155 billion yuan in 2024-2026. The PE corresponding to the closing price on December 6 was 64.00/39.22/31.09 times, respectively, maintaining the “gain” rating.

Risk warning: Market recovery falls short of expectations; overseas business risks; new business development falls short of expectations.