Changjiang: The operation differentiation of the social service sector, education shows increasing resilience.

Changjiang released a research report stating that in the first half of 2024, the overall revenue of the social service industry increased by 4.3% year-on-year, benefiting from the high prosperity of offline travel, and the revenue of various sub-industries basically achieved positive growth; On the profit level, the performance was differentiated with the overall non-GAAP net profit of the industry in 2024H1 decreasing by 13.2% year-on-year. Among them, the non-GAAP net profit of the human resources, education, and hotel sectors increased by 49.6%, 32.1%, and 20.9% year-on-year, respectively, while the non-GAAP net profit of the duty-free, catering, and resort sectors decreased by 31.7%, 28.5%, and 12.5% year-on-year, mainly due to the weakening of consumer demand. In the education sector, under the new regulatory environment, the pattern of supply exceeding demand continued to benefit the industry's leading institutions, which, relying on brand strength, product strength, and organizational capabilities, restarted expansion and gradually realized revenue performance. In the first half of 2024, the overall revenue of the industry increased by 4.3% year-on-year, benefiting from the high prosperity of offline travel, and the revenue of various sub-industries basically achieved positive growth; at the profit level, the performance was differentiated with the overall non-GAAP net profit of the industry in 2024H1 decreasing by 13.2% year-on-year. Among them, the non-GAAP net profit of the human resources, education, and hotel sectors increased by 49.6%, 32.1%, and 20.9% year-on-year, respectively, while the non-GAAP net profit of the duty-free, catering, and resort sectors decreased by 31.7%, 28.5%, and 12.5% year-on-year, mainly due to the weakening of consumer demand. Cash flow trends synchronously with revenue trends. In the first half of 2023, revenue significantly recovered, driving current cash flow for service consumption with no inventory and collection cycle repairing. In 2024H1, net operating cash flow decreased year-on-year against a high base. However, the duty-free, hotel, catering, human resources, and outbound travel sectors still significantly surpassed the same period in 2019. Education: Policy trends are clear, with industry leaders returning to growth. In early February 2024, the Ministry of Education and other thirteen departments issued a draft for soliciting opinions, limiting subject training to primary and secondary school students and preschool children aged 3 to 6. In addition, a classification management mechanism for non-subject training and subject training was established, making the policy environment for non-subject training more clear. Under the new regulatory environment, the pattern of supply exceeding demand continued to benefit industry leaders, which, relying on brand strength, product strength, organizational capabilities, and other advantages, restarted expansion and gradually realized revenue performance. Hotel: Product structure upgrade, attention to summer operating data. In the first half of 2024, business travel demand continued to be weak while cultural and tourism demand was robust. The industry saw supply recovery and intensified competition, with ADRs experiencing a decline, and RevPARs declining year-on-year against a high baseline. Leading hotel groups benefited from strong brand power and structural effects of product upgrades, resulting in RevPAR performance that outperformed the industry. Resorts: The number of travel visits continues to grow, with attention on per capita spending recovery. In the first half of 2024, the tourism market was stable with steady passenger volume, and holiday periods outperformed weekdays, with the number of visitors recovering better than per capita spending. Under the high base of holiday travel in 2023, the number of tourists continued to grow during the holidays in 2024, demonstrating the resilience of tourism consumer demand. As listed company performance varied, with the peak summer season coming, it is expected that passenger flow will recover, releasing performance elasticity. Human Resources: Slow improvement in demand, company operations are differentiated. Employment services, especially mid-to-high-end headhunting services, have clear pro-cyclical properties; flexible labor services have a counter-cyclical logic for long-term penetration rate improvement, but in the short term, they are also positively related to economic prosperity and enterprise investment expansion, with pro-cyclical attributes. In the first half of 2024, the job market demand was slowly recovering, with varying performances in listed company revenue. Looking ahead, it is suggested to pay attention to macroeconomic trends, inflection points in job demand, and listed companies reducing costs and improving efficiency to release performance. Catering: The demand is sinking, competition is intensifying, adapt to the new. Since 2024, the growth rate of catering consumption has slowed down due to the joint effect of a high base and sinking consumption. The supply side of the industry rebounded rapidly in 2023, leading to intensified market competition, sinking unit prices. From a sampling of April 2024, the sinking trend continues, with price decreases in leisure scenes>daily scenes>dining scenes. Catering companies that adapt to new consumption trends and make adjustments in brand positioning, product mix, etc., are expected to take the lead in breaking through. Duty-Free: Pressure on sales of duty-free goods on offshore islands, orderly recovery of duty-free goods at ports. At the industry level, duty-free sales on offshore islands have been sluggish since 2024 against a high base, with pressure from both quantity and price, especially on prices; duty-free sales at ports, international flights and passenger traffic continue to recover, with airport duty-free shop revenues gradually picking up. At the company level, improvements in product structure and store format revenue structure optimization have driven profitability improvements. Investment advice Grasp the two main lines of oversold rebound and growth. From a growth perspective, focus on sectors such as education, resorts, and outbound tourism with stable competition, as policy benefits continue to be released and demand resilience is expected to continue; from an oversold rebound perspective, there are investment opportunities in sectors such as human resources, catering, and duty-free goods. Risk warning 1. Slow consumer recovery; 2. Increasing business costs; 3. Expansion falling short of expectations; 4. Intensified industry competition.