\u3000\u30 Zhongyan Technology Co.Ltd(003001) 44 Songcheng Performance Development Co.Ltd(300144) )
On April 23, 2022, the company released the annual report of 2021 and the first quarterly report of 2022. In 2021, the company achieved a total operating revenue of 1.185 billion yuan (YoY + 31.27%), a net profit attributable to the parent company of 315 million yuan (YoY + 117.98%), and a net profit not attributable to the parent company of 268 million yuan (YoY + 115.15%), turning losses into profits compared with the same period in 2020. In 2022q1, the company realized a total operating income of 853041 million yuan (yoy-72.16%), a net profit attributable to the parent of -385865 million yuan (yoy-129.15%), and a net profit not attributable to the parent of -401334 million yuan (yoy-130.85%), which turned from profit to loss compared with the same period in 2021.
Key investment points:
The performance of 2021 ushered in a marginal improvement, and the epidemic repeatedly dragged down the performance of 2022q1: split the annual performance of 2021, and the performance of the company recovered well in the first half of 2021, with a revenue of 735 million yuan (YoY + 159.66%) and a net profit attributable to the parent company of 378 million yuan (YoY + 849.43%). Since 2021q3, with the spread of covid-19 mutant strain in many places in China, the dynamic zero normalization epidemic prevention and control measures have hindered the recovery of the company’s performance, and the loss range in 2021q4 has been further increased compared with the same period in 2020. Among the three major scenic spots, the revenue of Hangzhou headquarters was + 69.36% year-on-year, recovering to 53% in 2019; Sanya Songcheng’s revenue increased by 16.41% year-on-year, recovering to 38% in 2019; Lijiang Songcheng’s revenue was – 14.85% year-on-year, recovering to 35% in 2019. In 2022q1, the epidemic broke out in Shanghai on a large scale, and many surrounding cities such as Hangzhou and Suzhou were affected. Under the epidemic prevention and control policy, the company’s largest main projects, Hangzhou Songcheng and the newly built Shanghai qiangu scenario, were closed intermittently, which significantly dragged down Q1 performance. At present, the epidemic situation in China led by Shanghai continues to ferment, which may affect may day travel activities, and the momentum of performance improvement in the short term is weak.
Actively adjust and respond to the epidemic, and the development toughness remains unchanged under the pressure of performance: during the epidemic, the company actively adjusts and prepares for short-term, medium-term and long-term development. Taking the song city in Hangzhou and the eternal scene area in Shanghai as the breakthrough, the company continues to adjust the spatial layout, innovate and enrich the content, optimize the line trend, promote the breakthrough and upgrading of the mode of the Performing Arts Park, and lay the foundation for the company’s short-term resumption of operation; Comprehensively dispatch and integrate advantageous resources, increase investment, accelerate the pace of building a science and technology song city, and provide guarantee for the medium-term development of the company; Strengthen the study and judgment of the situation, think deeply and summarize, carry out drastic integration and optimization from the aspects of industrial layout, project layout and asset light expansion, accelerate the implementation of platform development strategy, and make sufficient preparations for the long-term development of the company; Comprehensively reconstruct the organizational structure, personnel structure and management process, strengthen refined operation management, and escort the comprehensive development of the company. During the holidays in 2021, the total number of people received, the total number of performances, operating revenue, the proportion of individual tourists and the length of stay of tourists in Hangzhou Songcheng are close to or higher than those in the same period in 2019, and the resilience of performance rebound is prominent. Relying on the advantages of Hangzhou Songcheng headquarters, the company has deeply expanded the customer circle of generation Z and built a new consumption scene. In 2021, the first first first tier city layout Shanghai qiangu scene area was successfully opened. Thanks to the location advantages and market space, the guest unit price reached a new high in all scenic spots in song city, with rich performance reserves and ready to appear. After the gradual improvement of the epidemic situation in China, retaliatory travel may bring more than expected performance to the eternal scenario area of Shanghai.
Major shareholders intend to take over the equity of the company’s two major projects to support the company to survive the cold winter of the industry: on the same day of financial report disclosure, the company announced that it plans to transfer 100% equity of the Australian project and Zhuhai project to the controlling shareholder Songcheng group, with a total consideration of 1.052 billion yuan. Among them, Zhuhai project is transferred in the form of entrusted management, and Songcheng group promises to give priority to the transfer to the company when Zhuhai Park meets the conditions for injection into the company. On the one hand, the transaction helps to alleviate the company’s cash flow pressure under the cold winter background of the industry, on the other hand, it enables the company to focus on its core business and improve the efficiency of capital operation.
Profit forecast and investment suggestions: in the long run, as a leading enterprise in China’s performing arts industry, the company has built a national chain operation network, continuously improved its market share, increasingly enhanced the efficiency of resource allocation, and formed a first mover advantage in the first and second tier tourist cities in China. With the advantages of cultural brand, creative editor and director, whole chain service and other aspects, the subsequent performance recovery of the company has strong toughness. In the short term, due to the repeated delay of the recovery rhythm of the epidemic in 2022, it is expected that the May Day travel data will be less than expected, and the annual performance data will face great uncertainty. Therefore, we lowered the previous profit forecast. It is estimated that the net profit attributable to the parent company from 2022 to 2024 will be 435 / 528 / 776 million yuan respectively (794 million yuan in 2022 / 1278 million yuan in 2023 before adjustment), and the PE corresponding to the closing price on April 25, 2022 will be 77 / 63 / 43 times respectively. Considering that if the epidemic prevention and control is relaxed, the company’s performance will have greater flexibility and maintain the “overweight” rating.
Risk factors: the risk of further deterioration of the epidemic situation, the risk of macroeconomic fluctuations, and the risk that the operation of new projects is less than expected.
