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Event Comments: European line management is picking up, optimistic about the industry's upward trend

Westdollar.com April 18, 2018 00:00 Guohai Securities Zhou Yuhua View original PDF

Zhongxin Tourism (002707)

The three sectors of wholesale, retail and integrated marketing have developed steadily. In 2017, the company's outbound wholesale, outbound retail and integrated marketing businesses achieved revenues of 8.91 billion yuan (+19.8%), 2.05 billion yuan (+13.7%) and 880 million yuan (+24.1%), respectively, contributing 74.1% of the company's revenue. The proportions of %, 17% and 7.3% were basically the same as the contribution of the same period last year (74%: 18%: 7%). The gross profit margin of the outbound wholesale business was 7.88%, down 0.39 PCT year-on-year; the gross profit margin of the outbound retail business was 16.36%, up 0.92 PCT year-on-year; the gross profit margin of integrated marketing business was 10.55%, up 0.02 PCT year-on-year. The company's three major sectors saw steady growth in revenue and the gross profit margin was relatively stable.

The gross profit margin decreased slightly and the cost was well controlled. The overall gross profit margin of the company decreased by 0.46 PCT to 9.89% year-on-year, and the net profit margin decreased by 0.1PCT to 2.33%. The company's sales expense ratio during the period was 7.02%, down 0.07 PCT year-on-year. The sales, management and financial expense ratios were 5.64%, 1.34% and 0.03%, respectively, up 0.22 PCT, 0.17 PCT, and 0.12 PCT, respectively. The decrease in financial expenses was mainly due to the increase in exchange gains.

In terms of regions, the European line is picking up and Asia continues to grow rapidly. In 2017, the revenue growth rate of European destination products exceeded 30%. After the impact of terrorist attacks and fingerprint visas, the European market is expected to gradually emerge from the downturn. The company also strengthens its in-depth development in products, subdividing the products of southeastern North West Europe, Russia and Arctic, and continues to maintain its leading position in Europe. The Asian tourism market continues to grow rapidly, with an annual service number of more than 1 million (accounting for 50% of the company's annual travel service), making it the company's second largest source of income. The company continues to invest in scheduled flights and charter products at hot destinations to strengthen its position in the Asian market.

From the customer base, Beijing and East China continue to maintain a leading position. In 2017, Beijing, East China and Central Plains contributed 41.1%, 25.9% and 11.5% of the company's revenue respectively, accounting for nearly 80% of the total. The three regions' revenue growth rates were 11.4%, 22.2% and 18.7%, respectively. The rapid growth of income in East China is partly due to the expansion of retail stores. By the end of 2017, the number of retail stores in East China was 25, and the revenue growth rate exceeded 200%.

Earnings Forecast and Investment Rating: The synergy effect between the company and Zhuyuan International Travel Business has gradually emerged, and it has achieved good growth during the industry downturn and its operational capability has been highlighted. It is estimated that the company's 2018 and 2019 EPS will be 0.36 yuan and 0.46 yuan respectively, corresponding to PE and 33 times respectively. It is optimistic about the future development space of the entire outbound tourism industry chain. The company will continue to benefit as a leader and maintain the Buy rating.

Risk warning: emergencies and natural disasters; exchange rate fluctuations; increased competition; policy changes

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Zhongxin Tourism Fundamental Data
  • Total share capital of 850 million shares
  • Circulating shares 510 million shares
  • Earnings per share 0.16 yuan
  • Undistributed profit per share 1.13 yuan
  • Net assets per share 2.57 yuan
  • Return on equity 6.03%
  • Net profit of 13828.37 million
  • Net profit growth rate 45.18%
Zhongxin Tourism Investment Rating
Overall rating in January
Overall rating in March
Statistical period Buy Overweight neutral Reduction Sell total
Within one month010001
Within three months430007
Within six months19800027
Within a year371400051
Zhongxin Tourism Profit Forecast
                                index 2017A 2018E 2019E 2020E
Earnings per share (yuan) 0.27 0.38 0.49 0.62
Net profit (100 million yuan) 2.33 3.21 4.19 5.25
name Quote change Number of research reports Institutional investment rating (nearly six months)
Buy Overweight neutral Reduction Sell
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Huatian Hotel 0.35% 0 0 0 0 0 0
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Jinjiang B shares -1.56% 0 0 0 0 0 0
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