The company announced its 2023 performance forecast. The travel industry has fully recovered throughout the year. The company's operating conditions have improved markedly throughout the year, and profits have turned losses into profits. The performance is in line with previous expectations, and we maintain our holdings increase rating.
Key points to support ratings
Losses were reversed throughout the year, and the recovery was in line with expectations. According to the company's performance forecast, it is expected to achieve operating income of 30-35 billion yuan for the full year of '23. Compared with the revenue scale of 500 million yuan last year, there is still plenty of room for further recovery compared to before the epidemic; net profit due to mother is expected to be between 2300 to 34.5 million yuan and loss of 221 million yuan in the same period last year; net profit without return to mother is expected to be 800-12 million yuan, a loss of 256 million yuan for the same period last year. The profit is basically in line with expectations. Furthermore, in the fourth quarter, the company is expected to achieve revenue of 9.47 to 1,447 million yuan; net profit due to mother is estimated to be 887-20.37 million yuan, and net profit without deduction to mother is expected to be 222 to 1.78 million yuan.
Flight supply and other factors will limit the resumption of outbound travel throughout 2023. According to flight managers, international passenger flight operations continued to recover in 2023, from less than 10% at the beginning of the year to 58% at the end of the year.
The January 2024 recovery continues. Looking at the full year of 2023, international air capacity is insufficient, limiting the full recovery of outbound travel business. According to data from the State Administration of Immigration, the number of people entering and leaving the country reached 424 million in 2023, or 63% in 2019; of these, the number of mainland residents entered and left the country was 206 million, or 59% in 2019. In addition, negative news, visas and other factors from some tourist destination countries are also limiting further restoration of inbound and outbound travel business, and there is still plenty of room for future inbound and outbound travel demand.
Outbound travel continues to grow, and the outlook for a 24-year recovery is good. China promulgated mutual visa exemption agreements with Malaysia, Thailand, and Singapore. Combined with factors such as the Spring Festival and winter vacation, various benefits contributed to a further increase in travel sentiment. Various OTA platforms reported strong demand during the Spring Festival. According to the Zhongxin Tourism Spring Festival travel trend report, outbound travel destinations such as Northern Europe, Australia, and New Zealand received more attention during the Spring Festival. Looking ahead to '24, the China Institute of Tourism Research predicts that domestic tourism revenue for the full year of '24 will exceed 6 trillion yuan, up 22% year on year; international tourism revenue will reach 107 billion US dollars, up 38% year on year. Domestic and international revenue will return to 105% and 81% levels in '19, respectively, and the recovery may continue.
valuations
As a leading outbound travel company, the company grasped opportunities and continued to optimize its business in the context of the industry's accelerated restoration, and achieved 23-year results to reverse losses. Its performance forecast is basically in line with previous expectations. We maintain our forecast EPS of 0.03/0.16/0.24 yuan for 23-25, with a corresponding price-earnings ratio of 234.6/37.6/24.9 times, maintaining an increase in holdings rating.
The main risks faced by ratings
Risk of uncertainty in inbound and outbound tourism policies, industry recovery falling short of expectations, and market competition risk.