Investment Rating - The report maintains a "Buy" rating for the company [6] Core Views - The company reported Q3 revenue of 753 million RMB, a year-over-year decrease of 9.94% but a quarter-over-quarter increase of 45.19%. The net profit attributable to the parent company was 354 million RMB, down 22.60% year-over-year but up 130.88% quarter-over-quarter [1][6] - For the first three quarters of 2025, the company achieved a total revenue of 1.833 billion RMB, a decrease of 8.98% year-over-year, with a net profit of 754 million RMB, down 25.22% year-over-year [1][6] - The decline in Q3 revenue was primarily due to a decrease in performance and an increase in sales expense ratio. However, the performance during the National Day holiday showed a slight recovery, which is expected to positively impact Q4 [1][2] Summary by Sections Q3 Performance - The company experienced differentiated performance across its existing projects, with total performances for the "Eternal Love" series reaching 3,471 shows in Q3, a decrease of 11% year-over-year. Notably, performances in Hangzhou, Shanghai, and Guilin increased by 2%, 18%, and 10% respectively [2][3] - The company reported a total of 510 shows during the National Day holiday, receiving nearly 3 million visitors, setting a new record [2] Marketing and Sales - The company has increased its marketing efforts, leading to a rise in the sales expense ratio to 8.2%, an increase of 2.8 percentage points year-over-year. Various projects have launched promotional activities to attract visitors [3] Profit Forecast and Valuation - The company has adjusted its net profit forecasts for 2025-2027 down by 16.1%, 13.1%, and 13.8% to 903 million RMB, 1.075 billion RMB, and 1.185 billion RMB respectively. The corresponding EPS is projected to be 0.34, 0.41, and 0.45 RMB [4] - The target price has been adjusted to 9.84 RMB, down from 10.25 RMB, reflecting a 25x PE for 2025 [4][6]

Financial Performance - In the first half of 2025, the company achieved revenue of 1.08 billion CNY and a net profit of 400 million CNY, showing a year-on-year decline [2] - The decline in revenue is primarily due to a decrease of approximately 86.1 million CNY in light asset output business income [2] - Operating cash flow increased to 722 million CNY, maintaining growth year-on-year [2] - Total operating costs rose by 7.98% year-on-year, driven by increased advertising and labor costs [2] Strategic Initiatives - The company is focusing on enhancing visitor experience through high-interaction activities and content innovation, including influencer collaborations and high-end family programs [1][2] - A significant upgrade of the Hangzhou project is underway, integrating Song culture with modern elements to create a comprehensive cultural performance kingdom [3][4] - The company plans to expand its offerings with diverse performances and enhance the overall visitor experience [3][4] Market Positioning - The company is targeting key consumer demographics, including families, women, and Gen Z, adapting to the trend of increasing individual and younger visitors [8] - The company maintains a stable pricing strategy, avoiding low-price competition to protect brand integrity [8][9] Future Growth Prospects - The company has signed two new light asset projects in Qingdao and Taizhou, with a total order value of 520 million CNY, expected to open in 2026 and 2028 [12][13] - The company is exploring international expansion opportunities, particularly in Thailand, while considering various investment strategies [13][15] - The company aims to achieve long-term sustainable growth by enhancing performance quality and expanding its market presence [15] Dividend Policy - The planned cash dividend for 2024 is 0.2 CNY per share, with a total cash dividend amount of 525 million CNY, reflecting a 100% increase from 2023 [10]