23Q2 revenue recovered to 77% in '19, and net loss to parent narrowed. (1) 23H1 achieved operating income of 383 million yuan, +6% year-on-year, recovering to 68% in '19; realized net profit of -46 million yuan, -42% year-on-year, mainly due to 1) a year-on-year decrease in line passenger transportation profit; 2) a year-on-year decrease in fuel purchase and marketing spreads and a year-on-year decrease in sales profit; 3) a year-on-year increase in termination benefits and bank loan interest. (2) 23Q2 The company achieved operating income of 192 million yuan, +13% year-on-year, recovering to 77% of 2019; realized net profit of -14 million yuan, further narrowing from a loss of -316 million yuan in 2022.

By business: (1) Passenger transportation business segment: 23H1 chartered bus rental business achieved revenue of 44 million yuan, +65% year on year; customized passenger transport business achieved revenue of 03 million yuan, +119%; school bus business achieved revenue of 0.2 billion yuan, +20% year on year; urban and rural bus business revenue of 223 million yuan, +13% year on year. (2) Automobile service sector: 23H1 sold 33.73 million liters of fuel, of which 89% of foreign sales; the charging pile business achieved sales of 5.41 million yuan, +44% year-on-year; and the automobile sales business had sales of 67.45 million yuan. (3) The commercial operation sector achieved rent income of 29.79 million yuan, +4% over the same period last year.

The gross margin was basically the same year on year, and the expenses side was properly controlled. 23H1 achieved a gross profit margin of 12.95%, year-on-year -1.3 pct; of these, 23Q2 achieved a gross profit margin of 14.06%, -1.01 pct year-on-year. In terms of expenses, 23H1's sales expense ratio was 1.37%, year-on-year -0.16 pct, and management expense ratio was 23.36%, year-on-year -0.73 pct.

Asset restructuring continues to advance, and it is expected that the duty-free business will provide a second growth curve. In May '22, the company proposed to acquire 100% of the tax-free shares of Sea Travel. The restructuring was approved by the Hainan Provincial State-owned Assets Administration Commission and accepted by the China Securities Regulatory Commission in September, October, and November '22, respectively, and received a “feedback” in November '22.

The March 23 takeover transaction was accepted by the Shanghai Stock Exchange. 23H1 During the reporting period, the company completed its response to the first inquiry letter from the Shanghai Stock Exchange regarding this major asset restructuring. We expect asset injection to continue to advance and bring new momentum to the company's growth.

Profit forecast and investment suggestions: The company is deeply involved in the passenger transport business. As passenger flow in Hainan continues to recover, the traditional business is expected to maintain stability. At the same time, it is steadily promoting the injection of tax assets, accelerating transformation and upgrading, and embracing the second growth curve. Leaving aside the revenue and performance increase brought about by asset injections for the time being, we expect the company's revenue for 2023-2025 to be 78/83/890 million yuan, up 5%/7%/7% year on year, and net profit to parent to be -0.31/0.23/43 million yuan, respectively, -178%/+175%/+85% over the same period, giving it a “recommended” rating.

Risk warning: Risk of macroeconomic fluctuations, risk of asset injection falling short of expectations, risk of recovering consumption power falling short of expectations.