Introduction to this report:

Wangfujing Joy Center is building a dimensional cultural district, which is expected to increase passenger flow and transformation.

Key investment points:

Investment advice: Maintain the company's EPS of 0.48, 0.52, and 0.59 yuan in 2024-2026, consider the company's duty-free business development potential, give 35xPE higher than the industry average in 2025, maintain a target price of 18.2 yuan, and maintain an increase in holdings rating.

The millet economy is booming, and the offline retail industry is transforming. With the rise of Gen Z young consumers, industries related to two-dimensional culture have set off a consumer boom in China, carrying young people's pursuit of self-satisfaction and emotional experience. According to Quest Mobile, the two-dimensional and gaming user base reached 0.5 billion in 2023, accounting for 40% of all online users. According to Ai Media Consulting, the size of China's millet economy grew from 53.7 billion yuan in 2017 to 120.1 billion yuan in 2023, and growth has accelerated in recent years. Offline shopping centers, department stores, etc. are introducing millet stores or creating business formats related to the millet economy, attracting young customers and revitalizing traditional retail.

Wangfujing Joy Center is building a dimensional cultural district, which is expected to increase passenger flow and transformation. Using the Wangfujing Joy Project as an experiment, Wangfujing Group followed Gen Z consumer trends and positioned the second basement floor of Joy Shopping Mall as an XY headline game. It has a dimensional cultural district, covering various fields such as animation, games, figures, and cosplay, strengthening emotional links with young consumers and meeting the diverse needs of young consumers. At the same time, for the family customer base, Joy Center attracts traffic through dimensional culture, and is also expected to drive sales transformation for other categories and brands.

The main business is actively adjusted and optimized, and tax exemption programs are progressing in an orderly manner. In the first three quarters of 2024, the company's overall passenger flow in all business formats achieved a slight year-on-year increase. Since Q2, customer unit prices have been under year-on-year pressure due to a decline in consumer willingness to buy and a decline in purchasing power. The company is currently concentrating superior resources to actively develop the shopping center and Ole business. The “one store, one policy” accelerates the transformation and upgrading of the department store business, and the shopping center and Ole business are highly resilient. In terms of duty-free, the company is currently making every effort to prepare for the opening of the Harbin Pacific International Airport Duty Free Shop and the Mudanjiang Hailang International Airport Duty Free Shop, and is also expected to bid for duty-free projects in the city.

Risk warning: Consumer demand is weak, and bids for duty-free projects fall short of expectations.