Main points of investment:
Business sector diversified coordination, the acquisition of 51% of Yunnan CITS shares, the integration of tourism resources in the province. Through its holding subsidiary, the company mainly engages in comprehensive tourism services (scenic spot operation, tourism hotel, tourism transportation, travel agency, tourism culture) and garden horticulture, and plans to merge into culture and travel technology to form a closed-loop layout of the tourism industry chain. In the first quarter of 2019, the company achieved revenue of 327 million yuan (+ 15.6%), of which gardening, tourism, transportation and travel agencies accounted for the highest proportion of revenue, which constitute the company's main source of income. In December 2018, the company acquired a 51% stake in Yunnan CITS and merged it within the year, solving the problem of long-standing competition with major shareholders and further consolidating the company's tourism layout in Yunnan Province.
Investing in high-quality assets can enhance profitability, and business synergy can promote revenue growth. On April 9, the company announced that the CSRC approved the company to purchase 100% of its stake in Wenlun Technology from the overseas Chinese Town Group and three natural shareholders, Li Jian, Wen Hongguang and Jia Baoluo, by issuing shares and paying cash to purchase assets. The cumulative operating income in the first three quarters of 2018 is 465 million yuan, the total profit is 199 million yuan, and the profit level is considerable, which will become the core engine of the parent company's performance in the future. After the placement of Culture and Travel Technology, the total profit can increase by 210.83%. At the same time, the company has realized the extension of upstream business, supported by tourism science and technology, to promote the transformation and upgrading of scenic spots while improving the operational efficiency and business coordination of various sectors, so as to achieve the internal digestion of plate business and the improvement of revenue capacity.
Major shareholder overseas Chinese Town Group tourism comprehensive plate national expansion, leading to the expansion of tourism business in Yunnan. The majority shareholder overseas Chinese cities and towns explore new profit growth points, and put forward the business model of "culture + tourism + new urbanization". In July 2018, the three major platforms of the overseas Chinese Town promoted the "Yunnan Great Battle", signing 20 projects with the governments of various states, cities, counties and districts in Yunnan Province, 13 projects with well-known domestic enterprises, and 19 contracts with enterprises in various war zones of the overseas Chinese Town. 8 entrusted construction and management contracts were signed, and a total of 60 projects were signed. The project is distributed in 12 prefectures, prefectures and cities, covering scenic spot operation, hotel management, characteristic town construction, new urbanization construction and so on. As a listed company, Yunnan tourism may win the opportunity of high-quality asset injection and business expansion in the process of resource integration.
Profit forecast and investment suggestions: after 17 years of tourism consolidation in Yunnan market, passenger flow is gradually picking up, which is conducive to the recovery of the company's traditional main business growth rate. As a key tourism listed enterprise in Yunnan Province, the company has formed a closed-loop layout of the tourism industry chain after putting in the high-quality resources of culture and tourism science and technology, the profitability has been greatly improved, and the business synergy effect will be fully reflected. The indirect increase of capital and holding of overseas Chinese Town will help the company to make full use of the resources of major shareholders and form the global tourism layout of Yunnan. It is estimated that the company's net profit from 2019 to 2021 will be RMB 2.77 billion and RMB 0.36 billion, respectively, and its EPS will be RMB 0.27. The corresponding valuation will be 23-17-13. After the company spun off its real estate business and put it into Wenzhou Travel Technology, the traditional business will form a favorable cash flow support. The new business will provide rich profit volume and higher profit growth rate. It is expected that the profit growth rate in 2020max will be maintained at about 30% in 2021, covering it for the first time. Considering that the average PE valuation of the scenic spot industry in 2019 is 27 times, it is given a "overweight" rating.
Risk hint: Wenzhou Travel Technology acquisition progress is not as expected; Yunnan tourism market is not growing as expected due to bad weather.
