In 2020, the company achieved an income of 1.615 billion yuan (- 73.25%) and deducted non-net profit of-763 million yuan (a profit of 73.56 million yuan in 2019). The performance was lower than the forecast due to the impact of investment losses. The year 2020 is the darkest moment for the outbound travel industry, the 2021H2 industry is expected to restart in an orderly manner, and the recovery trend will gradually become clear. It is suggested that we should pay attention to the layout of the company's domestic tourism, new retail and other business, and maintain the "overweight" rating.

A large loss was recorded under the epidemic, and it was confirmed that the performance caused by the investment loss was lower than expected. In 2020, the company achieved an income of 1.615 billion yuan (- 73.25%), a return net profit of-698 million yuan (a profit of 126 million yuan in 2019), and a non-net profit of-763 million yuan after excluding non-recurrent profits and losses such as government subsidies (a profit of 73.56 million yuan in 2019). The lower performance than the previous forecast is mainly due to the impact of the bankruptcy restructuring of HNA Group, that is, it confirmed the investment loss of 295 million yuan in the long-term equity investment of Yisheng Financial Services. The main reason for the large performance loss is that the epidemic situation has had a significant negative impact on the tourism industry, especially the outbound travel industry, and the demand for air and railway catering has declined under the epidemic.

The outbound travel business has been hit hard by the epidemic, and the aviation department has reduced the demand for food distribution. The revenue of tourism business / catering business reached 10.39 / 469 million yuan respectively, down 78.87% and 56.65% compared with the same period last year. In the tourism business, the revenue of wholesale / retail / enterprise awards reached RMB 1.80 million 5.92 million respectively, down 60.37%, 83.21%, 71.55%, 2.68%, 10.80%, 12.93%, respectively. Year-on-year changes-22.23 picks, 4.90 races, 2.51pcts, outbound tourism stagnated due to the spread of overseas epidemic, and gross profit margin of wholesale business dropped sharply. In the catering business, air / rail revenue is 322 million yuan respectively. Compared with the same period last year, the gross profit margin decreased by 58.70% to 51.33%, the gross profit margin was 27.86% to 32.29%, and decreased by 14.30% to 5.85 pcts. For the sake of epidemic prevention and control and cost reduction, aviation departments have greatly reduced the demand for aviation catering, but there is relatively little room for adjustment of fixed expenses such as wages, energy, depreciation and amortization.

Under the pressure of profitability under the retail model, increase the development of domestic leisure travel products. In 2020, the company's sales expense rate was 21.39% (+ 9.48pcts), management expense rate was 14.68% (+ 10.73pcts), R & D expense rate was 2.06% (+ 1.8%), and financial expense rate was 5.96% (+ 4.35pcts). Due to the sudden drop in revenue, even if the operating expenses were reduced, the rigid cost of offline channels was high, and the overall profitability was still under pressure. Due to the stagnation of outbound tourism, the company increases its investment in domestic tourism, focusing on Beijing and Hainan, focusing on developing cultural leisure tourism products, and exploring global flow operation (private domain: construction of "live broadcast + tourism"; public domain: introduction of MCN incubation system). In terms of retail business, it is also actively exploring catering retail and duty-free business on the island, opening the first "looking for MI LOUNGE" in Beijing, and setting up companies in Haikou and Sanya respectively as the main body of operation to carry out duty-free business on the island.

Strengthen the layout of Hainan and look forward to the recovery of outbound tourism. The company plans to further focus on the Hainan market, is expected to launch the Sanya scenic spot through train business pilot this year, and plans to develop Qionghai tourism, new retail and other business sectors in Hainan. In terms of the core industry of outbound tourism, the second half of the year may be the starting point of recovery, but it is expected to be under pressure throughout the year. According to the forecast of the China Tourism Academy, under the condition of smooth popularization of the vaccine, the outbound tourism market is expected to start in 2021H2, and the number of outbound tourists in 2021 is expected to return to 22% in 2019.

Risk factors: the deterioration of the global epidemic situation, the lower-than-expected progress of domestic tourism product development, the impact of exchange rate fluctuations, and so on.

Investment advice: due to the impact of the overseas epidemic, the demand for outbound travel continues to be suppressed, and the company shows a large loss. We believe that outbound travel is expected to restart in the second half of this year, but it is expected to go through a long climbing repair period, so the company may still face losses this year. However, the company actively adjusts its strategy, increases the expansion of domestic travel products, and explores new retail business. with the company's advantages in brands and channels, the recovery progress is expected to be ahead of the outbound travel agency industry. it is suggested to pay attention to the follow-up outbound travel recovery nodes and the company's layout in domestic tourism, new retail and other business. To sum up, the EPS forecast for 2021-2022 is reduced to-0.12 RMB 0.06 yuan (the original forecast is 0.05pm RMB 0.12 yuan), and the EPS forecast for 2023 is increased by 0.14 yuan, maintaining the "overweight" rating.