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Huangshan:1H17core earnings in-line??topline slight miss

十月 6th, 2019  |  股票基金

Bottomline up by 10% mainly driven by cable car business

1H17top line up by 13%; bottom line up by 27%

Box office collection in 2017 was RMB55.8bn, increasing by 23% yoy
(vs.

    Huangshan announced its 1H17interim report today. The company
reported thatcore net profit increased by 10% yoy to RMB192m in 1H17from
RMB174m in1H16, in-line with our estimate of RMB194m, while top line was
flattish yoy(RMB732m in 1H17vs. RMB726in 1H16). We believe the margin
increase wasmainly driven by increasing contribution from its cable car
business (enjoys grossmargin of c. 85%). We reiterate our Buy rating on
Huangshang Tourism with TPof RMB22.4.

    Utour Travel announced its 1H17interim report today. The company
reported thattop line increased by 13% yoy to RMB5.05bn in 1H17from
RMB4.46bn in 1H16and core net profit increased by 27% yoy to RMB94m in
1H17from RMB74m.We believe the margin increase continues in 2017due to
better products mixchange. We reiterate Buy given the company’s more
diversified products andmore attractive valuation than previously. Our
new target price of RMB15(fromRMB17) reflects a cut in our 2017wholesale
business growth forecast.

    RMB45.5bn in 2016). If we exclude ticket handling fees (c.6% of
total box office),total box office in 2017 increased by 15% to
RMB52.4bn, which is in line with ourestimates for the same time last
year. We believe this is mainly due to a strongHollywood movie
performance in 1H17 and surprising “Black horse” Chinesemovies in 2H17,
such as Wolf Warriors 2 and Never Say Die. Longer term, we areconfident
that the China box office will reach c.RMB81bn in 2020, which impliesa
CAGR of 16% from 2016 (the base year). The total number of cinemas by
2017was 9,370. New additions of cinemas was 1,519, a yoy growth of
almost 20%.

    Topline slight miss mainly due to more free tickets in 2Q

    Top line up 13% yoy, driven mainly by outbound wholesale business

    We have seen total incremental movie screens of 9,597, a yoy growth
of 23%.

    Huangshan attracted 1.64million tourists in 1H17, yoy growth of 16%.
However,the company’s topline decreased by 1% to RMB732m in 1H17. We
believe this ismainly due to more free tickets given in 1H17(note
according to management,c.0.2million tourists enjoyed free tickets in
1H17). Last year, free tickets wereconcentrated in Q3, which was a heavy
rainy season, therefore we believe growthshould recover in 2H, and keep
our full year forecast of 3.9million tourist trafficunchanged.

    Wholesale outbound – revenue rose 13% to RMB3.88bn in
1H17fromRMB3.43bn in 1H16. This was the main driver of total top-line
growth,however, wholesale business growth slows down compared to 27%
yoygrowth in 2016. We believe that this is mainly due to the slowdown
ofoutbound travel in China (number of outbound tourists increased only
by5% to 62million in 1H17from 56million in 1H16)

    China’s total movie screens is now 50k.

    Cable car revenue grew 6% yoy to RMB220m in 1H17from RMB207m in1H16,
mainly driven by rising tourism volume (cable cars attracted
totaltourists traffic of 3million in 1H17, yoy growth of 8.28%).

    Retail outbound – By end-1H17, the company has 108offline
stores.Revenues from the retail sales business rose 7% to RMB769m in
1H17from RMB720m in 1H16. Recall that the company has planned to
expandits offline stores to 200in the next two to three years. We
believe marginswill continue to increase in 2017under the company’s
strategy of revenuemix change.

    Chinese movies (c.11% yoy growth) contributed c.57% (vs. 58% in2016)
of China’s total box office in 2017, recovering from less than30%
contribution in 1H17. This was mainly driven by the more thanRMB7bn in
box office generation from Wolf Warriors 2 (a record-breakingRMB5.68bn)
and Never Say Die (RMB2.19bn).

    Revenue from tickets and travel service dropped 6%/13% yoy
toRMB108m/RMB136m in 1H17(vs. RMB116m/RMB156m in 1H16). Webelieve this
is mainly due to 1) more free ticket events in March and June2017and 2)
reform of business tax to VAT (started in May 2016)

    For foreign movies, especially from Hollywood, growth remained
robust:movie box office grew c.21% yoy on a like-for-like basis. We
believe thatthe strong performance of Hollywood movies was mainly driven
by actionseries movies.

    . Revenue from hotel business delivered yoy growth of 1% to RMB255m
in1H17from RMB253m in 1H16.

    IMAX reported 4Q17 (as of Dec 24) box office of USD56.3m in
GreaterChina. As of Dec 24, IMAX 2017 box office decreased by 3% yoy.

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