Key points of investment
The company achieved revenue of 724 million yuan in 2023, an increase of 117.9% over the previous year, and recovered to 134.7% in 2019; realized net profit of 175 million yuan, an increase of 1374.9% over the previous year, and recovered to 149.3% in 2019. The 24Q1 company achieved revenue of 180 million yuan, down 6.1% from 23Q1, and a recovery of 134.7% from 19Q1; realized net profit of 52 million yuan, down 15.8% from 23Q1, and 134.4% from 19Q1.
In 2023, the company achieved revenue of 718 million yuan, the hotel business achieved revenue of 234 million yuan, a year-on-year increase of 86.2%, a gross profit margin of 16.5%, and a year-on-year increase of +34.4pct; the ropeway cable car business achieved revenue of 295 million yuan, a year-on-year increase of 136.1%, and a gross profit margin of 48.6%, an increase of 126.3% over the previous year; the travel agency business achieved revenue of 0.67 million yuan, a year-on-year increase of +34.4pct; the travel agency business achieved revenue of 0.67 million yuan, a year-on-year increase of +34.4pct 197.0%, achieving a gross profit margin of 9.39%, -5.4pct year over year.
The overall passenger flow declined in 24Q1 due to climatic effects. The overall passenger flow in the Jiuhuashan Scenic Area declined in the first quarter, mainly due to the late Spring Festival and the effects of freezing rain and snow, and the Jiuhuashan Mountain was closed for a week. According to the management committee data, the Jiuhuashan Scenic Area received 1.583 million visitors from January to February, a decrease of 8.6%, achieving tourism revenue of 1,829 billion yuan, a decrease of 6.84%; retail sales of limited consumer goods fell 8.7% year on year.
Due to the impact of operating leverage, passenger flow has a great impact on performance fluctuations. The company's 23Q4 gross margin was 44.72%, +25.75%, sales/management expenses accounted for 8.91%/16.96%, +2.08%/-4.23%, the company's 2024Q1 gross margin was 54.68%, -3.27% YoY, and sales/management expenses accounted for 4.16%/11.45%/, respectively, +0.06%/+0.26% YoY.
The transportation conversion center was completed, and the Lion Peak project is planned and implemented to support the expansion of the scenic area. The main functional area of the Jiuhuashan Transportation Conversion Center function upgrade project was completed during the 2024 Spring Festival and initially put into use. 5,207 vehicles can be parked to meet the needs of more than 5,000 people per hour during peak periods. The Lion Peak project plans to invest 326 million yuan, including 295 million yuan for ropeways and 31 million yuan for alpine walking trails; the total planned area of the project is 17,700 square meters, and the construction period is expected to be 2 years. According to the Feasibility Report, based on a occupancy rate of 40% in the first year, 15% increase in annual passenger flow, and no increase in the 15th year, the estimated loss in the first three years of operation, average annual revenue of 111 million yuan, total annual profit of 50 million yuan during the 15-year period, return on investment of 15.32%, internal rate of return of 9.54% (after tax), and a payback period of 11.92 years (including a 2-year construction period).
The opening of the Chihuang High Speed Rail is imminent, and passenger traffic is expected to continue to be catalyzed. As of March 25, 2024, the Chihuang High Speed Rail completed various joint commissioning and testing tasks safely, with high quality and efficiency, and successfully moved into the operation test stage. Jiuhuashan Station is located in Pailou Village, Rongcheng Town, Qingyang County. It is about 6 km from the Jiuhuashan Scenic Area and 2 km from Qingyang County. It is closer than the previous Chizhou Station to the Jiuhua Scenic Area. We expect passenger traffic to increase in East China and central China, as well as during non-holiday periods.
The company is expected to achieve net profit of 1.89/219/234 million yuan in 2024-2026, reversing the year-on-year losses/ +15.66%/+6.86%, maintaining the “increase in holdings” rating.
Risk warning: risk of passenger flow recovery falling short of expectations, risk of macroeconomic fluctuations