Incident: On April 7, the company released its 2022 annual report. During the reporting period, it achieved operating income of 740 million yuan/year-on-year +1.06%, net profit of 39 million yuan (loss of 72 million yuan in the same period last year), net profit of -108 million yuan (-89 million yuan for the same period of the previous year); among them, the fourth quarter alone achieved operating income of 249 million yuan/+56.90% year-on-year, and Guimo's net profit was 137 million yuan/915.45% year on year, net profit of the non-homogenous mother was 0.09 million yuan/915.45% year on year, net profit of the non-homogenous mother was 0.09 million yuan/year on year +2.29% +2.29% .

Operating disturbances still exist, and asset disposal proceeds helped reverse losses. Affected by frequent external disturbances and long-term travel restrictions, the company's passenger transportation and related business were greatly affected throughout the year. In 2022, Haikou completed 17.81 million passengers/-33.37% year on year, and passenger turnover of 1,506 million people per kilometer/-37.36% year on year, a sharp decline from the same period last year, but the company actively expanded business segments including commuter buses, customized passenger transportation, and car services, effectively boosted the company's revenue growth and achieved a slight increase throughout the year; at the same time, during the reporting period, Haikou City paid land for the company's South Bus Station. Recycle, corresponding generation Asset disposal revenue of 105 million yuan, combined with special subsidies, etc., had a total positive impact of 118 million yuan on the profit side.

Sea travel restructuring matters are progressing steadily, and performance is expected to increase significantly in the context of the recovery. The company plans to acquire 100% of China Travel's duty-free shares by issuing shares and paying cash, with an overall transaction price of $5.02 billion. Currently, the Securities Regulatory Commission has accepted and is in the review stage, and restructuring matters are progressing steadily. Since the policy was optimized, a recovery in travel and consumption has gradually been implemented, and passenger traffic in Hainan has quickly recovered. It is expected that travel to Qinghai will continue to expand along with external disturbances. After the restructuring is implemented, it is expected that the company's performance will increase significantly.

Investment advice: The company is a leader in passenger transportation in Hainan Province, and sea travel duty-free is at the forefront of Hainan duty-free operators. The return of consumption combined with the release of duty-free policies has led to rapid growth in the company's performance; overall business turbulence is still there under the influence of external factors, and it is expected that the elasticity of performance will be evident as travel resumes. If asset restructuring is implemented, the company's operating performance will be greatly enhanced. Assuming that the injection is completed in 2023, we expect the company's net profit to be 390/636/883 million yuan in 2023-2025. Considering the increase in the company's share capital brought about by restructuring, EPS is 0.49/0.80/1.12 yuan/share, maintaining the “buy” rating, and the target price is 40 yuan.

Risk warning: The impact of e-commerce diversion far exceeded expectations; manpower and rent costs have increased dramatically; industry competition has clearly intensified.