(Report Producer Author: Zheshang **, Ning Fujie, Lu Zichen).
1.1. Deeply cultivate the performing arts industry, and the shareholding structure is concentrated
The company is the first performing arts stock in China, one of the top ten global theme park groups, and has won the title of "Top 30 National Cultural Enterprises" for many consecutive years, and is an advanced unit in the reform of the national cultural system. The company's main business is the investment, development and operation of theme parks and cultural performances. At present, Songcheng Performing Arts is guided by the strategy of "Performing Arts Songcheng, Tourism Songcheng, International Songcheng, Science and Technology Songcheng, IP Songcheng, Internet Celebrity Songcheng", and has built and is under construction Hangzhou, Sanya, Lijiang, Jiuzhai, Guilin, Zhangjiajie, Xi'an, Shanghai, Foshan, Australia and other dozens of major tourist areas, 30 theme parks, hundreds of eternal love and performing arts shows, and has dozens of cultural and entertainment projects such as China Performing Arts Valley. Hangzhou Songcheng Group Holdings*** and Huang Qiaoling are the controlling shareholders and actual controllers of the company, and the shareholding structure is concentrated. Huang Qiaoling and his concert parties directly hold 1323% equity. Hangzhou Songcheng Group Holding Co., Ltd., the controlling shareholder of the company, holds 2772% of the shares, Huang Qiaoling and his concerted actors directly and indirectly hold 100 of Hangzhou Songcheng Group Holding Co., Ltd00% equity, with a final shareholding ratio of 4095%。
1.2. Main business: live performance + tourism services
On-site performing arts business: The company has created a unique business model of "theme park + cultural performing arts". Relying on the two major brands of "Songcheng" and "Eternal Love", we provide customers with high-quality cultural tourism products with a variety of performing arts repertoire as the core with specific scenes such as theme parks as the carrier. The projects that have been opened include Hangzhou Songcheng, Sanya Eternal Scene Zone, Lijiang Eternal Scene Zone, Jiuzhai Eternal Scene Zone, Guilin Eternal Scene Zone, Zhangjiajie Eternal Scene Zone, Xi'an Eternal Scene Zone, Shanghai Eternal Scene Zone, etc. Tourism service business: including asset-light output business and online ticket sales business. The asset-light export business is provided by the company to the partner with brand authorization, planning and design, director and creation, trusteeship and operation and other services, and charges a package of service fees and entrusted operation and management fees. The online ticket sales business mainly refers to the online direct sales and distribution of tickets and performance tickets for the company's operating projects, as well as the joint ticket and package ticket sales formed by superimposing the ticketing of third-party ** merchants on this basis.
1.3 The tourism market recovered, and the company's recovery trend is improving
The industry and market have recovered strongly, the company's revenue has recovered rapidly, and the expense ratio has improved significantly. In 2023, the travel distance and consumption activity during the May Day holiday have reached a record high, and the number of domestic tourists and income have exceeded the level of the same period in 2019. Since the summer, the tourism market has continued its strong recovery momentum. According to data from the Ministry of Culture and Tourism, the total number of domestic tourists in the first half of 2023 will be 238.4 billion, up 639%；Domestic tourism revenue 23 trillion yuan, a year-on-year increase of 959%。In the first three quarters of 2023, the company achieved an operating income of 161.8 billion yuan, net profit of 80.5 billion yuan, net profit attributable to the parent company of 78.7 billion yuan, which was recovered to the same period in 2019. 93% and 6197%；The operating income in the third quarter was 87.7 billion yuan, net profit attributable to the parent company 48.4 billion yuan, respectively, recovered to the same period in 2019. 86%。From 2020 to 2022, the company's expense ratio was at a high level during various periods, and with the recovery of ** volume and revenue growth, the sales expense ratio in the first three quarters of 23 fell to 382%, and the overhead ratio dropped to 596%。
Since the peak summer season of 2023, the proportion of phased recovery of various projects has increased significantly. Among them, Hangzhou Songcheng has basically recovered to the level of the same period in 2019, while the Lijiang Eternal Scenario Zone and the Guilin Eternal Scenario Zone have greatly exceeded the level of the same period in 2019. On this basis, each scenic spot further seizes the market opportunity and carries out special activities according to local conditions. Stimulated by the opening event, the pre-sale of the Shanghai Eternal Scene Zone was very popular, and it was difficult to find a single ticket, with a total of more than 400,000 tickets in advance by the end of July. Hangzhou Songcheng held the first festival, carnival and other theme activities, igniting the passion of summer, the customer group structure is further younger, diversified, the Hangzhou citizen activities carried out by the general public warmly welcomed, on August 12, "Songcheng Eternal Love" set a new record of 21 performances in one day. Thanks to the increase in the number of projects and the continuous improvement of the business recovery ratio, according to the company's 2023 semi-annual report, the company's overall number of people and revenue indicators since the summer vacation have exceeded the level of the same period in 2019.
1.4 The negative impact of the flower house is expected to be reduced
Huafang Group's performance in 2023 will decline significantly, and Songcheng Performing Arts will hold a greater proportion of its shares from 3706% down to 3535%。The company in which Huafang Group holds 25% of the shares was investigated by **, involving Huafang Group's frozen account funds due to this matter 1$36.1 billion. For the six months ended June 23, 2023, the company's unaudited loss is expected to be approximately $29.1 million, compared to a net profit of $2.1 million for the same period in 202205.1 billion yuan. Adjusted net profit is expected to be approximately $56.4 million, compared to a net profit of approximately $2 for the same period in 2022$24.4 billion, with a total market capitalization of HK$2.3 billion. At present, all the frozen accounts of Huafang Group have been unfrozen and can be used for daily business operations, and Huafang Group has submitted about 1$5.5 billion, and active measures are being taken to promote the resumption of trading in accordance with the resumption guidelines of the Stock Exchange. The company will continue to urge Huafang Group to take active measures to promote the progress of the case. Now that the case has been transferred to the procuratorate, the company will continue to actively promote the progress of the case and the auditor's issuance of audited annual results, and strive to eliminate the impact on the company's qualified audit report as soon as possible. According to the resumption guidelines, the resumption of trading of Huafang Group is subject to the release of audited financial results for 2022 and the first half of 2023 performance report (review), independent investigation report, independent internal control report and other conditions, and the company is communicating with resumption consultants, auditors, and independent investigation consultants and promoting relevant work. In the future, the company will focus more firmly on the main business of performing arts, and will formulate further plans for the long-term equity investment of Huafang Group according to its own development strategy.
2.1. The whole industry chain is empowered, and the operation modules are linked and coordinated
The professionalism of the whole industry chain builds a competitive barrier to Songcheng's performing arts. In the process of long-term development, the company has formed a closed loop of the whole industrial chain of project site selection, planning and design, investment and construction, director and creation, stage presentation, scenic spot operation, marketing and promotion, upgrading and transformation, coupled with the company's strong work output ability, which effectively guarantees the company's differentiated management ability and continuous innovation and breakthrough ability, which is conducive to the company's cost control, efficiency improvement and profitability enhancement.
Theme Park + Cultural Performing Arts" business model to enhance the linkage effect and synergy effect of various business segments. The company has transformed and upgraded from the eternal love model of "one repertoire and one park" to the performing arts park model of "multiple theaters, multiple repertoire, multiple activities and multiple tickets", continuously enriching the content of performing arts operations and expanding the moat. This business model with performing arts as the core and theme parks as the carrier overcomes the shortcomings of a single theme park's lack of rich cultural connotation, lack of innovation and change after completion, and the lack of experience levels of a single tourism cultural performing arts program and its inability to meet the needs of tourists for personal participation and interactive experience.
The performing arts park model is profitable and efficient. Theme park tourism and performing arts programs are performed in the theme park, and tourists can also enjoy the performing arts programs during the rest of the amusement project, and the profit model is efficient. According to the data of the Daoluo Cultural Tourism Industry Research Center, in 2017, there were 26 theme park tourism performances, accounting for only 9 of the total number of performances6%, while box office revenue accounts for 45% of the total box office of tourist performances3%。
2.2. Indoor and outdoor theater matrix, with diversified repertoire to enhance customer coverage
Increase the number of theaters and improve the indoor and outdoor theater matrix. According to the company's planning, each scenic spot will consider supporting two theaters, which will help enrich the content of the scenic spot on the one hand, and increase the carrying capacity of the two theaters in the peak season, and on the other hand, it will help prevent risk events and ensure the continuous operation of the scenic spot. In order to achieve this goal, in the first half of 2020, Hangzhou Songcheng carried out a large-scale renovation and launched theaters of different styles, such as the Cliff Theater, the Forest Theater, the Water Stand, the Immersive Walking Theater, etc., and a variety of personalized theaters brought different performance experiences to visitors.
In line with the upgrade of the theater, the company pays attention to diversified content output. The company continues to produce diversified content and build a multi-level product matrix to meet the needs of different customer groups. Hangzhou Songcheng has now formed a large-scale song and dance show "Songcheng Eternal Love" as the main show, including the parent-child show "wa!".Dinosaur D live drama "Big **", holographic show "Phantom", war drama "Yingshan Hong", large-scale interactive experience project "Captain Cook" and "Shangganling", martial arts drama "Yanqing Fighting", interactive drama "Quanmei Case", naked-eye 3D "Fantasy Space", "Cliff ** Meeting", "Forest ** Meeting" and other drama matrices covering a variety of performing arts forms and various performance contents.
2.3. Low cost, high return, forming a replicable asset-heavy model
The company's asset-heavy projects are more economical in the early stage. Although the amount of investment in new projects has increased, such as Zhangjiajie Eternal Love, Shanghai Eternal Love, etc., the overall investment is small; Compared with companies in the same industry, Songcheng Performing Arts has shown obvious advantages in initial investment: the initial investment in Shanghai Songcheng is only about 800 million yuan, while the investment in projects such as Shanghai Disneyland and Chimelong Park is more than 30 billion yuan. From the perspective of investment per mu of land, the investment per square meter in Songcheng is only 30 million to 60 million, which is also far lower than that of comparable scenic spots. Songcheng Performing Arts focuses more on operation and management to achieve the upgrade of experience and efficiency.
After the consolidation of heavy asset projects, the growth of passenger flow reduced the proportion of amortized costs. Although the company's projects have gradually expanded and increased, with the maturity of the project and the increase in passenger flow after commissioning, the proportion of amortized expenses in revenue has declined. From 2007 to 2014, the proportion of expenses to be amortized increased from 125% to 188% and then decreased to 146%。
On the income side, Songcheng belongs to the combination of performing arts and theme parks, with rich business formats and strong experience, and realizes the common promotion of passenger flow conversion and profit improvement. The company's projects are mainly performing arts, and the antique park is the supporting facilities. Since the merger of tickets and performance tickets, the company has fully shifted to relying on performing arts to make profits, and the importance of antique parks is to improve customer retention time, increase the frequency of secondary consumption, and drive the joint development of related accommodation and catering industries. In terms of performing arts, the company adopts indoor performances, flexible site selection, extreme weather has little impact on the arrangement of performances, strong controllability, and at the same time, the capacity is easy to expand and the flexibility of passenger flow. On the cost side, Songcheng performing arts management efficiency is high and labor costs are low. With the ultimate polishing of the stage, Songcheng Performing Arts has formed a whole industry chain covering from the creation and arrangement of works to stage construction and promotion. Even at the busiest time, with a capacity of nearly 4,000 people, Songcheng Performing Arts can only achieve a gap of only 20 minutes between venues. In addition, due to indoor performances, the script has strong creative ability, multiple performances, and standardized scheduling, with significant scale advantages, lower actor costs, and about 300 people in a single performance, which is less than Impression Lijiang and other outdoor performances that require 500 people to complete, and the ability to standardize off-site replication is stronger. On the repurchase side, the company's script arrangement ability determines a high success rate of expansion. In the early days, the company's script was written by the chairman himself, laying a solid foundation for creative arrangement, and then cultivating a core team. According to ChinaTravelDaily, the company has optimized, adjusted and integrated its creative team to its current established creative team model. The pace of creation has increased from two performances a year to 10 performances a year. The company's R&D personnel in 2022 will be 158, accounting for 19%. The company's products are both artistic and aesthetic, and differentiated according to different regional characteristics, and the script is constantly iteratively upgraded to ensure user retention and repurchase, and it is expected to achieve faster climbing when the new eternal love project is opened.
Therefore, the ping effect drives the scale efficiency and forms a strong profitability of Songcheng. After the opening of Songcheng Lijiang, the revenue of Eternal Love has increased rapidly, and in 2016 it has surpassed Impression Lijiang, and the gross profit margin from 2016 to 2019 is more than 70%, which is relatively stable and higher than that of impression performances. Lijiang, Sanya and other eternal love projects continued to climb after opening, with a net profit margin of more than 50%, ROE of 20%-30%, fast investment, and low cash flow pressure.
3.1 Shanghai Songcheng explores urban performing arts and enters a climbing period
Shanghai Songcheng is located in the Expo Park on the banks of the Huangpu River, jointly built by Songcheng Performing Arts and Shanghai World Expo Development Group, with a total investment of 8With a land area of 18,039 square meters and a construction area of 41,200 square meters, it has three indoor theaters that can accommodate nearly 6,000 spectators at the same time, the largest of which can accommodate 2,900 people. In addition to the Eternal Love Theater, the scenic area is also equipped with more than 10 theaters and performance venues such as the Performing Arts Theater, the Forest Theater, the Punk Square, the ** Square, and the Guozhuang Square.
The Shanghai project was in line with expectations in the year of opening. On April 29, 2021, Shanghai Songcheng opened. During the May Day holiday in 2021, the Shanghai Eternal Scene Zone achieved an income of more than 25 million yuan and received 17 tourists90,000 person-times, the unit price of customers hit a new high in all scenic spots in Songcheng, breaking the first weekly record of the opening year of Songcheng in the country, and breaking the average monthly income record of the opening year of Songcheng in the country; In 2021, during the National Day ** Week, the Shanghai Eternal Scene Zone launched more than 50 performances throughout the day, such as live scenes on the banks of the Huangpu River and flying car performances, which appeared on CCTV and became a model of the National Day performance market. The tourism market is recovering strongly, and the Shanghai project is expected to restart the ramp-up. On May Day 2023, the number of domestic tourists and income have exceeded the level of the same period in 2019; Since the summer, the tourism market has continued its strong recovery momentum. According to data from the Ministry of Culture and Tourism, the total number of domestic tourists in the first half of 2023 will be 238.4 billion, up 639%；Domestic tourism revenue 23 trillion yuan, a year-on-year increase of 959%。On July 1, 2023, Shanghai Songcheng reopened, and the pre-sale of Shanghai Eternal Scene Zone was hot and hard to find by the end of July 2023, and the total number of pre-sale tickets exceeded 400,000 by the end of July 2023, and it is expected that Shanghai Songcheng is expected to restart climbing.
Shanghai's passenger flow base and passenger flow structure have laid the foundation for the city's performing arts, and the demand for the performing arts market has broadened the company's growth space. Compared with tourism performing arts, the customer base of urban performing arts presents more individual and localized characteristics. After 2011, with a few exceptions (2015 and 2020), Shanghai's passenger flow structure has maintained more than half of the local residents, which can more effectively support the city's performing arts market. At the same time, the scale of domestic tourists in Shanghai is much larger than that of Hangzhou and Sanya, both of which exceeded the total number of domestic tourists in Hangzhou and Sanya before 2016, and the gap gradually narrowed from 2016 to 2020, and the gap widened rapidly after the tourism market recovered in 2021, reflecting the strong resilience of Shanghai's tourism market. In the first half of 2023, a total of 22,054 commercial performances were held in Shanghai, an increase of 13 percent over the same period in 20192%；Engaging Audience 1199380,000 passengers, an increase of 25 over the same period in 20191%；Box office receipts 83.2 billion yuan, an increase of 165%, the strong recovery of Shanghai's performance market shows the booming demand of Shanghai's performing arts market, which will help Shanghai Songcheng explore urban performing arts and broaden its growth space.
3.2 The opening of the Foshan project is expected to usher in new growth
The company has a strategic layout in the Guangdong-Hong Kong-Macao Greater Bay Area, and the Foshan project has changed from light to heavy, and is expected to open in the Spring Festival of 2024. Foshan Project is the twelfth project of Songcheng Performing Arts in China, located in the Tingyin Lake area of Xiqiao, South China Sea, adjacent to the Qiaoshan Scenic Area, a national 5A-level scenic spot. In June 2017, Songcheng Performing Arts announced that it would cooperate with Nanhai District, Foshan City, to create the "Xiqiao Lingnan Cultural Tourism Project" in the Tingyin Lake area in an asset-light manner. In December 2018, Songcheng Performing Arts issued an announcement with 44.9 billion yuan to acquire 100% equity of Songcheng Xiqiao Mountain Lingnan Foshan Eternal Scene Zone Project Company, and subsequently independently build the "Songcheng Xiqiao Mountain Lingnan Foshan Eternal Scene Zone Project", with an estimated total investment of 1 billion yuan. The transformation of the Foshan project from light to heavy not only demonstrates the company's optimism and confidence in the prospects of the project, but also realizes the company's strategy of laying out the Guangdong-Hong Kong-Macao Greater Bay Area, and shares the market of national strategic radiation and super city agglomeration.
3.3. Asset-light projects continued to advance and expansion accelerated
Songcheng Performing Arts has opened up an asset-light business model and government-enterprise cooperation. Through an innovative asset-light business model, Songcheng Performing Arts works closely with enterprises and enterprises. In 2016, Songcheng signed a contract with the Ningxiang Tanhe Eternal Love Project, which opened in July 2017, taking the first step in the expansion of the asset-light model. Under this business model, the partner is responsible for the project construction and all operating expenses, making full use of the brand power of Songcheng. Songcheng provides services such as brand licensing, director, and trusteeship, with a construction period of 1-2 years, and the income generally includes 2$600 million in service packages and 20% of the project's annual revenue. The duration of the partnership is generally 5 or 10 years. With the success of the Ningxiang project, Songcheng signed contracts with Yichun and Xinzheng to open in late 2018 and September 2020 respectively. The partners of the asset-light model are usually the first investment, and work together with the state-controlled tourism investment company to achieve mutual benefit and win-win results. For Songcheng, the partner has rich experience in the development and construction of tourism parks, which will help to enhance Songcheng's brand premium and stable profitability. For **, the introduction of the Songcheng brand will help promote the development of the local third-party service industry and promote economic growth. This cooperation model has brought common benefits to all parties and built a good cooperation ecosystem.
The core role of the asset-light project is to integrate with the local tourism industry business and achieve a better drainage effect through the influence of Songcheng performing arts brand. Taking Yan'an and the Three Gorges as examples, Yan'an is adjacent to China's Yan'an Cadre College, Zaoyuan Revolutionary Site, and Zaoyuan 1938 Scenic Area, while the Three Gorges Eternal Love is located in the Yidu Sturgeon Bay Cultural Tourism Industrial Park at the confluence of the Yangtze River and Qingjiang River. The company has accumulated sufficient experience in the signing and operation of asset-light projects. There are a number of locations in China that meet the conditions for asset-light projects, and there are potential partners with the need to establish high-quality tourism destinations. The asset-light project model has strong profitability. Due to its positioning in lower-tier tourist cities, asset-light projects have lower par prices than asset-heavy projects. However, a larger proportion of the revenue of asset-light projects comes from the previous 2600 million service fee income, so the gross profit margin is as high as more than 95%, in addition, it can still participate in the annual sharing of project revenue, reducing the company's cash flow pressure. Asset-light can not only share the risk of operating leverage with investors, but also strengthen the network of performing arts and increase the entrance of offline traffic, thereby further consolidating the market position. This strategy not only helps to reduce the company's risk in the process of operation, but also enables the company to be more robust and flexible in the market competition.
3.4. The proportion of individual customers increased to further increase the gross profit margin
There is an upper limit on the gross profit margin of heavy asset projects, and the increase in the proportion of individual customers will effectively optimize the gross profit margin. There is an upper limit on the gross profit rate of scenic spots in the mature period, so the performance breakthrough of the eternal scenario area, in addition to strengthening brand awareness and drainage efforts, and promoting the increase of revenue and profit through passenger flow growth, is mainly implemented in the optimization of the structure of the group-to-scatter ratio. The high proportion of individual passenger income is conducive to the increase of the unit price of customers, and there is no difference in the reception mode of individual tourists and group tourists in the scenic spot, so in the absence of other factors, the operating costs spent on receiving the same number of individual tourists and group tourists are basically the same. Therefore, if the number of tourists remains unchanged and the structure of the group scatter ratio is optimized (the proportion of individual guests increases), the company's operating income and gross profit margin of a single scenic spot will be improved.
This article is for informational purposes only and does not represent any investment advice from us. To use the information, please refer to the original report. ）
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