Passenger traffic is high during the snow and ice season, and 2024Q1 performance hits a record high

2024Q1 achieved revenue of 128 million yuan/yoy +83.73%, and net profit of 10.7 million yuan/year-on-year reversal of losses (2023Q1 was -414 million yuan). In January-February, Changbai Mountain benefited from the spillover of snow and ice tourism in Northeast China. The main scenic area received 465,000 visitors/yoy +138.6% in the first quarter. During the same period, the company actively planned new forms of ice and snow experience such as Genting Market and Snow Field Crossing to receive traffic. The revenue side reached a record high, and the operating leverage of the main business was released, driving the profit side to positive for the first time, and the potential for snow and ice tourism was fully realized. The first quarter's performance was high, and passenger traffic in the scenic area grew steadily under supply optimization. We maintain the 2024-2026 profit forecast. We expect 2024-2026 net profit of 1.86/2.17/251 million yuan, yoy +34.8%/+16.3%/+15.7%, corresponding to EPS 0.70/0.81/0.94 yuan. The current stock price corresponding to PE is 30.4/26.1/22.6 times, maintaining the “buy” rating.

Steady operation in the off-season, relaxed during peak season. Domestic and foreign supply continues to improve quality and efficiency, and the differences in operation during the off-peak season are expected to further weaken: (1) Transportation level: the opening of the Shenbai High Speed Rail in 2025 will help bridge the off-season gap; at the same time, airport expansion and route expansion & Xiqu high-speed rail station landing balanced passenger flow distribution in northwest and southwest scenic spots to enhance peak season reception capacity (2) Scenic area level: Recently, Tongcheng Travel launched the “Changbai Mountain One-Flight Tour” service platform, cooperate with timeshare reservation measures to strengthen tourist diversion organizations and flexibly increase the carrying capacity of scenic spots, Continued focus on refined operation is expected to further break through passenger flow bottlenecks in natural scenic spots. (3) Company level: Launching experiential products such as sunrise viewing and stargazing to expand reception capacity in exchange for time. The occupancy rate of Crowne Plaza in 2023 was less than 48%. It is expected that there will still be room for hotel growth in the off-season. According to public exchanges, construction of the Hot Spring Tribe Phase II project is expected to begin in the second quarter of 2024, and plans to continue to expand the scope of passenger transportation services such as cruise taxis, chartered buses, and shuttle lines. It is expected that after the implementation of the fixed increase, the drainage capacity of the company's passenger transport/hotel sector will increase significantly, which is expected to further match the growth driven by incremental passenger flow. The main scenic area received 36,000/yoy +15.7% in March, and the off-season passenger flow maintained steady growth; the Qingming holiday received 22,800 visitors/yoy +850%, and the May Day holiday passenger flow is expected to continue to be high.

2024Q1 marketing investment increased, operating leverage contributed to a steady increase in profitability in 2024Q1. The company achieved a comprehensive gross profit margin of 28.22% /yoy+15.08pct and a net interest rate of 8.37% /yoy+14.31pct, which increased significantly under the influence of horizontal main business operating leverage. The 2024Q1 sales/management/finance expense ratios were 3.62%/9.89%/0.39%, yoy+0.62/-3.58%/-0.99pct, respectively. Sales expenses increased by 122% year-on-year. The biggest increase was mainly due to the company taking the initiative to strengthen its publicity volume and expand sales channels. It is expected that the marketing expenses will continue to be increased in the future.

Risk warning: Force majeure such as natural disasters; construction of hotel projects falling short of expectations; risk of fuel price changes.