The company announced its 2023 performance forecast. Net profit attributable to mother in 2023 was 280 million yuan - 390 million yuan, up 323.96%-490.52% year on year; net profit after deduction was 206 million yuan - 316 million yuan, up 578.47%-939.28% year on year.

The estimated net profit of Q4 was about 71 million yuan to 181 million yuan, an increase of 31.48%-235.18% over the previous year; net profit after deduction was about 61 million yuan to 171 million yuan, an increase of 38.63%-288.63% over the previous year.

Key points of investment:

The company actively promotes project execution, completed projects and a significant increase in operating income. The company gradually recognizes revenue according to the nodes based on the project progress. If the project can be obtained and promoted normally, the project revenue confirmed by the company increases. The company implemented the national cultural digitization strategy, actively promoted project execution, and completed projects and revenue increased dramatically. At the same time, in terms of new orders, the amount of new orders signed in 2023 was 2,651 billion yuan, an increase of 1,066 billion yuan over the previous year. The amount of new orders signed in the first half of the year was 761 million yuan, and the amount of new orders signed in the second half of the year was 1,890 billion yuan, an increase of 1,129 billion yuan over the previous year. The scale of new orders has increased significantly, which also provides a guarantee and impetus for the company's future performance transformation.

The company won bids for several projects. According to the company's announcement, the key projects the company won the bid for in the second half of the year were:

(1) Ganzhou Nankang District Cultural Power Museum project, winning bid amount of 176 million yuan; (2) Ordos Science and Technology Innovation Museum project, winning bid price of 223 million yuan; (3) Jiujiang Jiupai Rural Revitalization and Technology Transformation Center project, winning bid amount of 109 million yuan; (4) Ancient City Wall Regional Cultural Tourism Night Tour and Old Museum Area Renewal Project in Shouxian County, Anhui, won the bid price of 131 million yuan. The winning project revolves around the national cultural digitization strategy and urban renewal strategy, and uses VR/AR, holographic imaging, naked eye 3D, digital art and other technologies to create an immersive experience space and plan exhibition projects.

Policy promotion and cultural tourism promotion are expected to continue to drive an increase in demand. While the country continues to promote policies such as cultural digitalization and urban renewal, various provinces and cities are also focusing on building cultural tourism projects that can effectively combine local characteristics to attract tourists and vigorously develop the local tourism industry. As an industry leader, the company has built a number of benchmark digital new cultural tourism demonstration projects and established a relatively good publicity foundation. The company is expected to continue to benefit from the increase in related demand in the future.

The payback situation is good. According to the announcement, in 2023, the company vigorously promoted project settlement and repayment work, and accrued credit impairment losses decreased year-on-year. By increasing the collection of accounts receivable, the impact of credit impairment losses on the level of profit statements has been reduced.

Set up the MR Research Institute to explore the integration of MR technology and innovation in the main business. In January 2024, the company announced the establishment of the MR Research Institute, focusing on the field of mixed reality. It plans to develop 3D content production tools for VR/AR/MR, adapt to different development platforms and hardware devices, explore innovative applications of MR technology in cultural tourism, exhibition and display, and create an immersive interactive experience through the fusion of virtual reality technology. In May 2023, the VR immersive exploration project “The Disappearing Pharaoh”, which originated in France, attracted many visitors after being exhibited in Shanghai. In the future, offline travel projects based on VR/AR/MR technology on the supply side and demand side demand for immersive cultural experiences are both expected to increase.

Investment advice: Relying on its rich project experience and technical advantages in the field of digital exhibition and display, the company can benefit from waves such as digitalization of the cultural industry, urban renewal and transformation, and innovative demand for cultural tourism projects. The acquisition of new orders is good, and the projects under construction are progressing normally.

In the future, domestic cultural tourism consumption, cultural digital upgrading, cultural facility construction, and urban renewal will all have many opportunities for growth, providing a favorable development environment for the company's main business. Based on the company's performance forecast, we have kept our previous profit forecast unchanged for the time being. We expect the company's 2023-2025 EPS to be 0.51 yuan, 0.69 yuan, and 0.85 yuan. According to the closing price of 11.60 yuan on January 30, 2024, the corresponding PE is 22.95 times, 16.82 times, and 13.69 times, maintaining the “buy” investment rating.

Risk warning: financial pressure affects project bidding requirements; industry competition intensifies; accounts receivable repayment risk; risk of major shareholders' holdings reduction