Event

On December 6, the company announced that it planned to use its own funds to purchase the operating ships of other waterway passenger transport enterprises in the "two dams and one gorge" area, with an estimated purchase amount of no more than 70 million yuan.

Brief comment

The optimization and integration of regional resources has highlighted the advantages of the company.

The purpose of this acquisition is to further consolidate the market position of the company's tourism products in the region, and to realize the optimization, integration and upgrading of cruise ship resources in the "two dams and one gorge" region. The main passenger transport resources and ancillary facilities involved include the "Ville" passenger ship and its ancillary facilities owned by Yichang Qixia Tourism Shipping Co., Ltd., and the "Xiling Gallery" owned by Yichang Sandouping Waterway passenger Transport Co., Ltd. and other supporting facilities. First of all, the acquisition will greatly promote the intensive operation of cruise ships in the "two dams and one gorge" area, saving costs and improving efficiency. Secondly, this acquisition will greatly enhance the overall tourism image and tourism brand value of the "two dams and one gorge" area, enhance the attractiveness of tourists through integrated and efficient operation, and create a good reputation of tourist scenic spots through later service promotion. At the same time, through this acquisition, the company has gradually integrated the tourism and passenger transport resources in the "two dams and one gorge" area, which is more conducive to integrated operation, and will greatly enhance the company's competitive advantage in the passenger transport and tourism market in Yichang. The company's operating efficiency and profitability are expected to be improved, which is expected to have a positive impact on performance.

In line with the company's core strategy, the large-scale tourism business is expanding rapidly.

The acquisition of the company is in line with Yichang City's strategy of speeding up the construction of the three Gorges international tourist destination and the three Gorges national tourist resort with "two dams and one gorge" as the core, and also in line with the company's own stable development of tourist passenger transport business. the strategy of actively arranging and integrating tourism business in the three Gorges area and the construction of covering the periphery of Yichang and radiating "one river, two mountains"

The goal of the tourism traffic service system. The company's passenger transport service in the "two dams and one gorge" area has always had strong advantages. In 2018, the company's two dams and one gorge transportation products won the "Oscar" award of the Chinese tourism industry and "the best word-of-mouth tourism route". After this acquisition, the advantage will be more consolidated, and presents a strong momentum of development after the integration of regional tourism routes.

In March this year, the company also signed a strategic cooperation agreement with the Yangtze River three Gorges Tourism Development Company, a subsidiary of the three Gorges Group, to promote in-depth cooperation in the fields of "one district, four towns" and "two dams and one gorge". This acquisition is also in line with recent agreements. This acquisition is not only in line with the construction of the company's tourism passenger transport system, but also helps the company to further enhance the influence of tourism business, so as to continue to carry out in-depth layout in the field of tourism.

Equity incentive increases confidence and tourism transformation is steadily promoted.

The company disclosed the equity incentive plan, which plans to grant a total of 9.92 million restricted shares, accounting for about 2.97% of the company's total share capital. 161 people are encouraged, including company directors, senior executives, other senior executives, middle managers and core backbone. The equity incentive plan will be lifted in three batches within 36 months after the grant, with a proportion of 40%, 30% and 30% respectively. Through the equity incentive plan, the company will further bind the interests of the core backbone and enhance the company's confidence in development, so as to ensure the current transformation and layout of the company's tourism industry. At present, the company has built and completed the urban "one master and two deputy" urban tourism distribution center. At the same time, we will promote the construction of a "one main and four auxiliary" tourist passenger terminal system, "three Gorges International Cruise Center Wharf" and other projects are already under construction, and the original ports are also actively promoting functional upgrading. Cooperation with strong enterprises such as Changjiang Electric Power and Yichang, the national network, brings strong momentum for the follow-up multi-business development of the company.

The company's main business is stable, the logistics business meets the policy requirements, the tourism business currently has 6 luxury cruise ships and more than 160 luxury tour buses and other resources, and launched a number of highly competitive tourism routes. Under the premise of stable operation, the expectation of continued integration of surrounding tourism resources and the layout of diversified tourism formats is still strong in the future.

Investment suggestion: it is expected that the company's main business will further develop steadily in the next two years, logistics business will advance steadily, and tourism business will continue to increase, tourism business integration, operational efficiency improvement, incentives and upgrading, with great potential for growth. It is estimated that from 2019 to 2021, the EPS will be 0.37, 0.44 and 0.48 yuan respectively, while the current stock price corresponds to 26X, 22X and 20X respectively, maintaining the "overweight" rating.

Risk tips: road passenger transport and tourism service traffic safety risk; transport market downward risk; Yangtze River Delta tourism service enterprise competition risk; subordinate enterprise management integration risk.