Events:

According to the annual report released by the company in 2020, the company's annual revenue was 1.615 billion yuan, down 73.2% from the same period last year, and the net profit was-698 million yuan, down 655.7% from the same period last year. The company's gross profit margin in 2020 was 18.7%, a year-on-year reduction in 1.7pct. The earnings per share is-0.87 yuan.

Investment Summary:

In 2020, affected by the epidemic, the company's outbound travel business and catering business (air & railway) were hit at the same time, with annual revenue of 1.615 billion yuan, down 73.2% from the same period last year, and net profit of-698 million yuan, down 655.7% from the same period last year. The company's performance was lower than the previous forecast, mainly due to the bankruptcy restructuring of HNA Group, and the company recognized the impairment of the long-term equity investment of the associated enterprise Yisheng Financial Services. (the company holds a 20.31% equity stake in Yisheng Financial Services and confirms a loss of 295 million yuan on its investment. )

The company's gross profit margin in 2020 was 18.7%, a year-on-year reduction in 1.7pct. The overall expense rate for the period was 44.1%, an increase of 26.4pct over the same period last year. Among them, the rate of sales / management / R & D / financial expenses has increased significantly, mainly because the income has decreased significantly, but the cost is rigid and the expenditure is still large.

Pay attention to the domestic tourism, the new retail business and the business layout of Hainan actively go deep into the new direction of tourism sales transformation in the domestic market.

1) in 2020, the company will increase its investment in domestic tourism, focusing on Beijing and Hainan, focusing on local leisure and cultural products and short trips. 2) in 2021, the company started the through train service of Sanya scenic spot, connecting ports, business circles, hotels and scenic spots through short-distance connections. It will be replicated and promoted throughout the country in the future.

3) the company actively explores new and effective ways and channels to obtain customers, and constructs the global traffic operation of "private domain + public domain".

Creating a new retail model for catering and the innovation and transformation of catering business

1) use catering as the traffic entrance to build a local high-frequency consumption scene. The first store "looking for MI LOUNGE"

Has officially opened in Beijing, is currently promoting the establishment of No.2 store in Beijing, and will be gradually extended to Hainan and other places. 2) Air, railway catering and social catering three-wheel drive, including providing meals with group meals, scenic spots, schools, airport staff, etc. In the future, we will continue to expand customers with specific needs, such as schools, enterprises, governments, troops, and so on.

Complete the change of the place of registration of the company in the future in-depth layout of Hainan

1) on March 30, 2021, the company completed the change of registered address (from Shaanxi Province to Hainan Province). In the future, the company will continue to focus on Hainan market, take advantage of Hainan policy, enjoy various preferential policies of Hainan, and participate in the construction of free trade port. 2) in terms of island tax exemption, the company has set up two companies in Haikou and Sanya respectively as the main operators to carry out tax exemption on the island, and is promoting cooperation with suppliers of duty-free products and resources with duty-free warehouses. 3) with the continuous clarity and landing of Hainan's duty-free policy, with the help of its own experience in the field of tourism retail, the company is expected to further integrate multi-party resources, strengthen cooperation and achieve win-win results in the future.

The fixed increase plan is expected to be adjusted.

In April 2020, the company announced plans to raise 1.16 billion yuan in a non-public offering aimed at Wenyuan Fund (Chinese language GP+ Sanya Municipal Government LP), Suqian Hanbang (JD.com system), Huaxia Life Insurance, Shanghai Licheng and Qingdao Haotian. In view of the stricter rules for the identification of strategic investors by regulators, we expect the company's fixed growth plan to be adjusted.

Investment strategy: as the impact of the domestic epidemic gradually dissipates, domestic tourism continues to recover, aviation and railway operations are gradually normal, and the overall business situation of the company is improving quarter by quarter. At the same time, the epidemic accelerates industry clearance, and the company will be in a leading position in the industry in the future. Outbound travel is expected to start in the second half of the year, but the overall recovery will take time. During this period, domestic tourism, new retail business and various businesses in Hainan will provide the driving force for the company's performance growth.

We expect the company's earnings per share to be-0.07 plus 0.1, 0.3 yuan per share, respectively, 102 and 33 times PE in 2022-2023, temporarily downgraded to "overweight" rating, and follow-up focus on the recovery inflection point of outbound travel and the promotion process of domestic tourism, new retail business and various businesses in Hainan.

Risk tips: macroeconomic downturn; uncertainty of epidemic development; tourism industry recovery is not as expected; exchange rate fluctuation risk; shareholder risk and so on.