Incident Review: Operation of the European Union is picking up, optimistic about the industry's upward trend

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

K figure 002707_1

UTS Tourism (002707)

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

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

In terms of sub-regions, the European Union 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 Union is expected to gradually emerge from the downturn. The company also strengthens the in-depth development of its products and subdivides its products in Southeastern Europe, North America, Russia, and the Arctic, and continues to maintain its leading position in the European Union. The Asian tourism market continues to grow rapidly, with more than 1 million person-times (accounting for 50% of the company's annual tourist service), and it has become the company’s second largest source of income. The company continued to invest regular flights and charter products at hotspot destinations to strengthen its dominant position in the Asian market.

From a source perspective, Beijing and East China continue to maintain their leading position. In 2017, Beijing, East China and Central Plains contributed 41.1%, 25.9% and 11.5%, respectively, of the total revenue of the company, accounting for nearly 80% of the total revenue. The year-on-year revenue growth of the three major regions was 11.4%, 22.2% and 18.7%, respectively. The rapid increase in income in East China was partly due to the expansion of retail outlets. By the end of 2017, the number of retail stores in East China was 25, and its revenue increased by more than 200% year-on-year.

Earnings Forecast and Investment Rating: The synergies between the company and Chuk Yuen International Travel Service have gradually emerged, and they have achieved good growth during the downturn of the industry, highlighting their operating capabilities. It is expected that the company's EPS in 2018 and 2019 will be 0.36 yuan and 0.46 yuan respectively, corresponding to PE of 33 and 26 times, respectively, optimistic about the future development space of the entire outbound travel industry chain. The company will continue to benefit as a leader and maintain its BUY rating.

Risk Warning: Incidents and natural disasters; exchange rate fluctuations; increased competition; policy changes

List of important public tourism data
UTS Tourism Fundamental Data
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  • Total share capital of 850 million shares
  • Circulating shares 5.14 million shares
  • Earnings per share of 0.27 yuan
  • Undistributed profit per share 0.99 yuan
  • Net assets per share 2.44 yuan
  • Return on equity 12.06%
  • Net profit 232.6400 million
  • Net profit growth rate 8.27%
Zhongxin Travel Investment Rating
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Overall rating within one month
Overall rating in March
Statistical period Buy Increase holdings neutral Reduction Sell total
Within one month320005
Within three months12300015
Within six months15500020
Within a year311300044
Zhongxin Tourism Profit Forecast
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2016A 2017E 2018E 2019E
Earnings per share (yuan) 0.25 0.27 0.38 0.49
Net profit (100 million yuan) 2.15 2.33 3.20 4.17
name Quote change Research report number Institutional investment rating (nearly six months)
Buy Increase holdings neutral Reduction Sell
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CYTS 1.00% 30 twenty one 8 1 0 0
UTS Tourism 0.93% 15 11 4 0 0 0
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Jinling Hotel 0.90% 4 1 3 0 0 0
Huatian Hotel 0.84% 0 0 0 0 0 0
Lingnan Holdings 0.78% 3 2 1 0 0 0
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