Intelligent Finance News APP learned that Guosen Securities released a research report stating that the pre-epidemic natural scenic area companies sought diversified expansion, leading to higher capital expenditures and year-on-year decrease in ROE. Most of the natural scenic area ROEs in 2023 rebounded to around 10% or even higher than before the epidemic. Capital expenditure narrowed, and central dividend payout ratio moved up. The overall emphasis on investment return in scenic spots has been preliminarily validated by state-owned enterprise reforms. Short-term head scenic spots have shown resilience in visitor traffic, and related summer cooling products are expected to benefit directly from high temperatures. Meanwhile, in the next 2-3 years, the head scenic spots will successively enter a new project production stage, with the mid-term expected to benefit from the structural dividends of population and city.

Investment in scenic area sectors: stable growth + state-owned enterprise reform, with the current defense attribute of scenic areas more prominent. The dual attributes of growth stability and strong gaming have been shown in past investments in scenic targets. The well-known basic formula for scenic performance can be summed up as traffic volume x per capita consumption x profit margin. Expectations of price increases after 2018 did not materialize, and traffic volume became the most direct tracking variable affecting income. Long-term mature scenic spots tend to have relatively stable growth. However, traffic volume disclosure often has a lag while the prediction difficulty of scenic profit margin has been large. Therefore, during peak seasons and themes, refinancing cycles or opportunities driven by sector gaming may be available but with difficulty. Since the beginning of this year, some head scenic spots have shown outstanding resilience in traffic growth, while state-owned enterprise reforms have helped to strengthen scenic area cost management and relatively increased the certainty of returns. This report takes traffic volume as a perspective to look at scenic area investment.

Retrospect at home and abroad: head natural scenic spots through the cycle, demographic changes + rigid leisure methods. Immersive sightseeing and experiencing natural landscapes have been an important leisure method pursued by generations of people at home and abroad. China: The average traffic of Class A scenic spots has steadily increased in the 10 years before the epidemic. The average reception CAGR of single scenic spots from 2011 to 2019 was 1%. The United States: The national park traffic from 1970 to 2023 showed the most impressive performance. The average annual CAGR of traffic in single scenic spots during 1970-2023 achieved 0.7%, better than the overall scenic area 0.1%, which was boosted by two periods of traffic growth slope brought by baby boomers. Japan: the overall national park population fell in 1970-1980 and 1990-2016 under the slowdown in population growth and low resident consumption, but Fujisan-Hakone-Izu Park grew in the two phases at 3%/17% respectively. Its domestic head natural scenic spots demand showed outstanding resilience for tourism, which also helped inbound tourism.

Future prospects 1: head scenic spots are expected to benefit from the structural dividends of China's population and city. Tourism trends since the beginning of this year: 1) Compared with the first half of 2019, the age distribution of civil aviation passengers has shown a "two-increase, one-decrease" trend in middle age group; 2) county tourism growth rates are better than high-line cities. Our analysis: 1) Changes in China's population are the foundation of the underlying flow. Retired people born each year from 1962 to 1973 and students travelling learning market formed the Silver Hair Tourism and Students Learning Travelling market bases. 2) The multi-level city development in China has brought structural upgrading dividends. Referring to the First Financial Urban Category, we estimate that the per capita GDP of the third-tier cities in 2021 will surpass 0.01 million US dollars for the first time, and the fourth-tier and below cities are developing towards 0.01 million US dollars. The tourist demand of these 900 million people is gradually enriched.

Future prospects 2: looking at the tourism traffic distribution within a year, the off-peak season of scenic spots still has room for tapping. Peak season market: the summer of 2023 + statutory holidays contribute more than 60% of domestic tourism traffic, with the problem of reduced experience caused by increased queuing in peak season scenic spots being more prominent. In the past two years, head scenic spots have entered the core project expansion cycle, including the expansion of cableways (Emei Mountain A), the upgrading of transfer centers (Jiuhua Tourism), the purchase of vehicles (Jiuhua Tourism, Changbai Mountain), the addition of hotels (Huangshan Tourism, Lijiang Yulong Tourism), etc., which are expected to break through the reception bottleneck. Off-peak season market: Behind the fluctuations of tourism hotspots since 2023 are more active regional marketing drainage and more flexible ticketing policies; at the same time, there are also incremental highlights such as medium-term silver hair and students customers.

New highlights in scenic spots after the epidemic: improved profitability and increased dividends. Before the epidemic, natural scenic area companies sought diversified expansion, leading to higher capital expenditures and year-on-year decrease in ROE. Most of the natural scenic area ROEs in 2023 rebounded to around 10% or even higher than before the epidemic. Capital expenditure narrowed, and central dividend payout ratio moved up. The overall emphasis on investment return in scenic spots has been preliminarily validated by state-owned enterprise reforms.

Risk warning: macro systemic risks, slower-than-expected traffic recovery, project construction is behind schedule, etc.

Investment recommendation: Short-term head scenic spots have shown resilience in visitor traffic, and related summer cooling products are expected to benefit directly from high temperatures. Meanwhile, in the next 2-3 years, the head scenic spots will successively enter a new project production stage, with the mid-term expected to benefit from the structural dividends of population and city.