TravelSky Technology Limited (HKG: 696), a leading provider of information technology solutions for China's air travel and tourism industries, reported a 13.9% increase in net profit for the first half of 2024, achieving approximately RMB1.367 billion. The company also saw a 24% year-over-year increase in transactions processed through its electronic travel distribution system.
With a focus on technology innovation and overseas market expansion, TravelSky expects to maintain a net profit growth rate that surpasses passenger volume growth for the remainder of the year.
Key Takeaways
- TravelSky's net profit rose by 13.9% YoY to RMB1.367 billion in the first half of 2024.
- The company processed about 352 million transactions, a 24% increase from the previous year.
- Total operating revenue reached approximately RMB4.042 billion, marking a 22.2% YoY growth.
- Management is confident in maintaining rapid growth in the second half of the year despite competitive market conditions.
- Labor costs increased by 30.7% due to R&D capitalization and enhanced employee benefits.
- The company has a stable dividend payout policy, distributing 40% of net profit.
- TravelSky enjoys favorable corporate income tax rates as a high-tech company and expects an additional tax cut later in the year.
Company Outlook
- TravelSky anticipates the civil aviation transportation market will continue its growth trajectory in the second half of 2024.
- The company plans to sustain a net profit growth rate that exceeds the growth in passenger volume.
Bearish Highlights
- Management expects labor costs to continue their steady increase throughout the year.
- There has been a decline in other revenues due to adjustments in the payment business.
- The international airline and route recovery is not as robust as that of domestic routes and varies by region.
Bullish Highlights
- TravelSky's core business expansion, including airport innovation and digital and smart airport construction, contributes to its success.
- The leasing and logistics businesses are projected to grow.
- The company's overseas expansion strategies involve collaboration with Belt and Road initiatives and competitive product promotion in the Asia Pacific region.
Misses
- The company expects higher costs in the second half of the year due to business nature and cyclical factors.
- There are challenges like competition from other GDS distributors and the need for more talent recruitment.
Q&A Highlights
- The management clarified that commission growth is not directly correlated with passenger volume due to revenue recognition processes.
- They remain optimistic about recovery, with no significant changes in market share.
- Future dividend payout strategies are under continuous evaluation, with a current stable policy in place.
- TravelSky's strong cash position supports capital investment and business expansion.
TravelSky's interim results reflect a company navigating a competitive and evolving market with strategic initiatives and technological innovation.
The company's alignment with national growth strategies and its focus on expanding its service experiences internationally, especially outside Asia, position it to capitalize on the growing Chinese economy and civil aviation industry.
Despite facing higher costs and competitive pressures, TravelSky's management remains confident in the company's ability to achieve good revenue growth and sustain profitability in the long term.
Full transcript - TravelSky Technology Ltd ADR (TSYHY) Q2 2024:
Operator: [Foreign language]. Ladies and gentlemen, welcome to the TravelSky 2024, the interim reports and we will be ready to dial in in a minute, and let's get ready for this conference. [Foreign language]. The conference offers two participation options via telephone or online, [Operator Instructions]. Thank you.
Yu Xiaochun: [Foreign language]. Okay, ladies and gentlemen, esteemed friends from the investment community. Good afternoon. I'm the Board of Secretary of TravelSky Technology Limited, and welcome to the 2024 Interim Results Global Investor Online Conference. The performance materials have already been sent to you via email prior to the meeting, so please check your email for Rose's information. We look forward to your questions and a fruitful exchange. [Foreign language]. So first, please allow me to introduce the company's representatives attending today's meeting, Mr. Huang Rongshun, Chairman and the General Manager, Mr. Li Jinsong, Vice General Manager and Chief Financial Officer; Mr. Yuan Leifeng, Vice General Manager; Mr. Xi Sheng, Director of the Board Office; Mr. Chen Pong, Director of the Strategic Development and Reform Department; Mr. Yu Hui, Director of the Marketing and Corporate Management Department, Mr. Yuan Leifeng, Director of the Human Resource Department; Mr. Jin Song Li, Director of the Finance Department; and Mr. John Xue, Director of the Technology Management Department; and Madam Liu Jun, Vice Director of the Board Office; Madam Shengying Jie, Investor Relations Manager; and Mr. Li Tung Bo, Accounting Manager of the Finance Department and along with colleagues from the Board Office, the Finance Department and the Capital Operations and Innovation Business Department. [Foreign language]. Today's conference will be consist of two parts. The management remarks followed by a Q&A session. The entire meeting will be conducted with consecutive interpretation in both Chinese and English. Now please warmly welcome Mr. Rong Shun Huang, the Chairman and the General Manager, to deliver the speech.
Huang Rongshun: [Foreign language]. It's -- the investors and analysts, ladies and gentlemen, welcome to the 2024 interim results conference. On behalf of the Board of Directors, I would like to extend my sincere gratitude for your contribution and support and engagement. [Foreign language]. In the first half of 2024, the China's civil aviation passenger market experienced steady growth and continued to be positive, achieving stable and rapid development. As a leading provider of IT solution for China's aviation and the travel industry, our company seized the opportunity presented by the sector's recovery. We strengthened our safety foundation, maintained steady production and operations, accelerated technological innovation and deepened corporate reforms and gradually enhanced management efficiency. As a result, we achieved a net profit attributable to shareholders of the parent company of approximately RMB1.367 billion and making a year-on-year increase of 13.9%. [Foreign language]. And the company captured on the new cycle of the sustained rapid and healthy development in a severe aviation industry. We adhere to a strategy of steady growth and a stability with high-quality development as our primary objective making advancement in business growth, technology innovation and a social responsibility. [Foreign language]. So first, we focused on core business development promoting emerging business and supporting the industries digital transformation. [Foreign language]. After aviation IT services, our electronic travel distribution system proceeded approximately 352 million transaction domestic and international airlines up 24% year-on-year and a 4.4% growth compared to the same period in 2019 we offered innovative and intelligent digital aviation solutions signing contracts with four airlines for our ATOMS system enabling digital operation management our ETA product was successfully implemented by 19 airlines including the Hainan Airline, Shandong and Sichuan Airlines imparting airlines with services and the governors capabilities. [Foreign language]. In terms of the settlement and the clearing services, we focused on application of the new technologies advancing the implementation of the third-generation passenger revenue management platform at the Shandong Airlines and the Shenzhen Airlines. Additionally, we accelerated our expansion into passenger settlement for overseas low-cost of carriers with the first phase of our system successfully deployed at the Scoot Airlines at Singapore. [Foreign language]. Now in terms of the distribution IT system, we strengthened our expansion into overseas market, increasing market coverage in countries along the belt on the road and after 30 certified overseas BSP Market, 27 has been successfully implemented. [Foreign language]. The airport IT services we actively participated in smart airport construction and accelerated the promotion of the smart products. Our civil aviation transfer passenger services platforms was deployed in 252 airports, and the Transfer Pass mini program was launched in 58 airports. Our airport collaborative decision-making system won the bids for CHIHA and the national airports and our national airport shared passenger services platforms was awarded contracts for HERFE and BAINUK airports. [Foreign language]. In terms of the other IT services, we fully leveraged our data elements in reaching application scenarios in public safety, smart marketing, and broad finance, serving a total of 42 customers. Our blockchain-based asset trend traceability management system won the bid from the Shinzen Airline supporting full lifecycle and refined management of operational assets. Our digital payment pass system based on the digital currency service platforms was signed by seven airports offering digital RMB marketing services across various scenarios. [Foreign language]. And second, we implemented an innovation-driven development strategy, accelerating key technology breakthroughs and enhancing our technical innovation capabilities. [Foreign language]. In terms of the strategic layout, we accelerated the establishment of original technology source officially joining multiple central enterprise innovation alliance in advanced computing, computing power networks and cloud computing. We deeply engaged in the construction and technological planning of the next-generation Internet Innovation Alliance. [Foreign language]. Now talking about innovation achievements. For the 18th consecutive years, we were recognized as a key software enterprise, receiving 12 scientific and technological awards and 92 patent authorizations, including 87 invention patents. Notably, we secured our 1st ever US invention patent, breaking new ground in overseas patents. And thirdly, we actively fulfilled our social responsibilities, enhancing system operation and safeguarding capabilities and fully playing our role in safety support. [Foreign language]. Now talking about intrinsic safety, for 17 consecutive years, we maintained stable and safe production operations, successfully ensuring the secure operation of the civil aviation passenger information system during the spring festival travel season, the National People's Congress and the BoA Forum and the China Russia Expo. [Foreign language]. Now talking about the green and the low carbon development, our data center's intellectual integrated energy consumption management platform and a comprehensive renovation technology was included in a national recommended catalog of the energy saving and the carbon reduction technology and equipment in the industrial and information technology sector in 2024th edition. [Foreign language]. In the second half of 2024, the Civil Aviation Administration of China, CAAC expected the civil aviation transportation market to maintain a stable growth trend as a key player. In the civil aviation information and a national team in the information service sector, we will fully leverage our strength in technological innovation, industry control, and safety support. We will continue to enhance intrinsic safety capabilities, identify and intensify the market expansion efforts, the boost to technical innovation momentum, and fully unleash the viability of the corporate reforms, accelerate the improvement of modern corporate governance and strive to deliver even better performance to our shareholders and give back to the society. [Foreign language]. In closing, I sincerely hope that you will continue to support and accompany TravelSky on our journey forward. And we look forward to work together with you to build a brighter future. Thank you very much.
Yu Xiaochun: [Foreign language]. Thank you, Chairman Huang, and for your wonderful remarks. Now let's invite Mr. John Xue, Director of the Finance Department, to present the company's financial performance for the first half of 2024.
John Xue: [Foreign language]. Now dear esteemed investors and analysts, ladies and gentlemen, a warm welcome to you all. My name is John Xue, the Director of the Finance Department. I want to extend my gratitude for your ongoing attention and support to our company. [Foreign language]. In the first half of 2024, the civil aviation transportation industry continued its recovery with a stronger willingness among both domestic and international passengers to travel, laying a solid foundation for our business growth. So TravelSky preceded approximately 352 million passenger transactions reflecting a year-over-year increase of about 24% and a 4.4% growth compared to the same period in 2019. Specifically, the domestic airline system processed 24% more transactions year on year and a 6.6% increase compared to 2019, while the international airline systems processing volume grow by 26.9%, recovering to 49.2% of the 2019 level. [Foreign language]. So as the demand in the civil aviation transportation industry continued to rebound, TravelSky achieved a total operating revenue of approximately RMB4.042 billion in the first half of 2024, representing a year-on-year increase of 22.2%. And the total operating cost amounted to RMB2.535 billion an increase of 16.4% year-on-year. Net profit reach RMB1.377 billion, making a 14% increase year-on-year with basic and diluted earnings per share of RMB0.47 up 14.6% from the previous year. [Foreign language]. As for the detailed revenue, the cost changes and the reasons attributed to that, please check our announcement. I'd like to save some time for the upcoming Q&A. So overall speaking, the company's performance in the first half of the year was very strong with both revenue and profit showing year-on-year growth. However, based on the historic data due to the nature of our business and the factors such as project implementation and acceptance process, our total operating costs are typically higher in the second half of the year than in the first half. [Foreign language]. Now looking ahead to the second half of 2024, the company was sees opportunity presented by the recovery and the development of the sea-- industry to driving to achieve a year-on-year net profit gross rate that exceeds the growth rates and passengers volume and working towards steady development in quality and efficiencies aiming for even better operational results to give back to our shareholders and I would like to thank you very much for your long term support and that's how thank you so much. [Foreign language]. Thank you, Director Huang, for the presentation. We will now proceed to the Q&A session, and this session will be featured consecutive interpretation also in both Chinese and English. I now hand it over to the conference secretary to explain in the q and a process.
Operator: [Operator Instructions]. Now let's hear from our first investor and please connect to our first investor from Huatai Securities.
Xiaofeng Shen: [Foreign language]. Thank you very much. And my name is Shen Xiaofeng. I'm from the Huatai Securities. I have three questions. So, before I ask my question, I would like to take this opportunity to congratulate on the management for your wonderful performance. Especially for the first half of 2024, you really achieved a very good profit level. So, I have three questions. Question number one, which is about the system integration. For the system integration, you achieved wonderful results for the first half of the year. My question is can you maintain such a high level for the whole year or for the second half of the year? And what would be the outlook for the second half of the year, especially for the system integration, revenue. My second question is about labor cost. As you know, the labor cost has appreciated. And what is the outlook for the year-round labor cost? For the first half of the year, we do see the labor increased by 30.7%. There are positive and negative factors tied to that. For example, the capitalization of the R&D cost. So, my question is, can you give us an outlook for the later half of cost and also can you decompose what are the factors to those cost? Now my third question would be other expenditures and other revenues. In terms of the other source of other revenues, it has declined. Maybe that's due to some readjustment of the payment business. So, can you elaborate on that kind of readjustment? What are the details tied to that? In terms of the leasing and the logistics business, what would be the changes to that business? Thank you.
John Xue: [Foreign language]. Well, thank you so much. My name is John Xue. Let me echo your first question. The first question is about system integration. Yes, for the first half of the year we achieved great results in the system integration due to the following reasons. The first reason is we have steadily developed our traditional core business and meanwhile we also expanded into recruiting more airport innovation and airport business for system integration. As you know, China is dedicated to building the digital China and the smart airport commission. So, in this way we seize the opportunity. We call these the new infrastructure opportunities for us. So that's why we get more business in terms of the airport expansion, airport innovation and the digital and smart airport construction business. So that's why we achieved great results in the airport system integration business. [Foreign language]. Now from the year round I should say, we can keep such rapid growth momentum for the later half of the year as well. So, for year-round we can achieve very good growth. [Foreign language]. Of course, we also should say that for the airport, the system integration business, it's a very competitive market and also for the construction and innovation of the airport. It also has bullish years and a little bit bearish year. We call them big year and small years. So that's why the business growth may not be quite evenly distributed. [Foreign language]. Now talking about the system integration business, we do see a cycle from the bidding to winning the bids to the implementation, to the construction, to the settlement. So, it takes time for the full cycle to go through. And in the short run we may experience some volatilities, but for the middle to long run, this would be a very positive and continuous growing business. [Foreign language]. Now talking about the labor cost, that's your second question. For the first half of the year, we do see very rapid growth for the labor cost. That is because structural growth for the labors for the year round, I would say the year-round labor cost growth would be stable and steady. [Foreign language]. Now talking about the reasons attributing to the cost of the labor cost, I think there are three detailed reasons. First one, the capitalization of the R&D cost. And the second would be the increase in the social benefit to the employees. And the third one would be the first half and the second half we have unevenly distributed of the compensation to the employees. [Foreign language]. In conclusion, I should say, as a technical company, especially the IT system and the solution company, we have to keep a good compensation system to retain the best talents in the market and to incentivize our employees. So, year-round, and usually if you look at our history every year we have 5% to 10% of the compensation growth. And also, our regulators would always measure the performance. With the compensation appreciation, they would put a cap on how much we can grow the compensation. In one word, our compensation, growth and appreciation was closely tied to the performance. Now talking about the third question, the other business decrease that is majorly due to the payment transaction business have been down. That is due to the external environment and we would adjust our business strategies accordingly. Although in terms of the absolute dollar amount in the financial report, you can see the total volume has decreased. However, our profitability level, especially the margin has been improved, which make, uh, our profitability level much better than before. [Foreign language]. Tell me about the technical service, because we have more and more individualized and customization demand from the customers in terms of the product and the services. But this business would continue to grow. Now, in terms of the leasing business, which is very stable, especially the data house, leasing is quite stable business. [Foreign language]. Now talking about the logistics business, as China continue to be a very big manufacturing nation, that would continue to drive the logistics business growth. So, from middle to long run, we are optimistic on the logistics business. That's all for my answers. Thank you very much.
Operator: Now the second question is from CICC, analyst of Mr. Wu Qikun. Please connect to Mr. Wu. Thank you.
Qikun Wu: [Foreign language]. Thank you very much. The questions are from CICC. Mr. Wu. I have three questions. Question number one, which is about the recovery of the international airlines under the routes. If you look at the international airlines and the routes, actually the recovery seems to be not so robust. It's only 45% to 50%. So, my question is what is the outlook for the international airlines and the international routes recovery? And has there been any changes in our market share in this market? Because those international carriers, they can use another GDS. So, my second question is about the dividend payout strategy. So, what are the company's plans? So, for the dividends and also, in terms of the cash, you have abundant cash, which is RMB9.6 billion cash. What is the plan in usage of that cash? If the dividend is only RMB600 million to RMB800 million, so you have abundant cash to pay the dividend. Do you have any plan to increase the dividend payout strategy? And then my third question is about the commission, and also the growth in the commission and promotion expenses is much lower than the growth in the passenger volume because the commission growth is only 4% for the first half of the year, but the passenger volume growth by more than 20% for the first half of the year. So, what is the reason for this, discrepancy? Thank you.
Yu Xiaochun: [Foreign language]. So, thank you very much for question. Your question first, number one will be addressed by Mr. Yi Kwey and the second and third question will be addressed by Mr. Jung.
Unidentified Company Representative: [Foreign language]. Thank you. Dear Analyst. Dear investors, my name is Yu Hui I'm from the Marketing and Management Division. I want to take the first question. [Foreign language]. Now talking about the international airline. The routes, if you compare the recovery with the domestic, you can see the recovery is lower than domestic market in 2020, compare with 2023, there will be more than 20% growth. However, the recovery, if you compare with the number of 2019, which is before COVID, the recovery rate is only 54% of 2019 level. [Foreign language]. Now, if you look at the recovery of the international routes it’s not even, if you look at the best scenario that is between China and Africa, the recovery is 30% even higher than the 2019 number. If you look at the Asian and European and continent, actually the recovery rate is only 80% of the 2019 level. The worst would be the North American routes. The North American routes is only 20% of the 2019 level. [Foreign language]. In the future, I should say, there are a lot of uncertainty tied to the international routes of its recovery. When would the whole market recover to the 2019 level? We are not so sure. [Foreign language]. Actually, based on the CAAC's work report, they have been very practically to recover a lot of routes, including the China and the Middle East routes, the China and the Middle Asian, mid Asian routes, and also Latin America roots, and especially Rose emerging market routes. [Foreign language]. I should say we would continue to be optimistic about the recovery of the international roots. Now talking about our market share, I should say there's no big change in our market share. We took a lot of measures to try to maximize our market share and maximize our business revenue, and we wanted to achieve a better result in giving back to our shareholders. Thank you very much.
Unidentified Company Representative: [Foreign language]. My name is Jung. I would like to take the second and third question. I'm from the Department of Finance. Now to answer your question, talking about abundant cash. Yes, that's true. As a platform-based company and with multiple years accumulation, we have accumulated abundant cash at hand. We did this as one of our competitive advantages because we take the opportunity and seize opportunity during the COVID where the passenger turnover rate declined and also the, uh, system processing volume also hit the bottom. And to take this opportunity, we upgraded our system and we improved our overall system performance. In this way, we are fully prepared for the recovery and also while, maintaining our core advantages. We try our best to satisfy the customer's customization, demand and diversify demand. And we also look into the strategic new business to aiming for the future growth. And we attach great importance to real sectors. We believe all this business expansion needs capital investment. [Foreign language]. So, I should say, after we get listed for more than 20 years, we have been always very active in returning to our shareholders and giving back to our shareholders. Our dividend payout policy has been quite stable, and we would pay out 40% of the net profit as dividend. And this had continuously been our strategy for dividend payout policies. [Foreign language]. As to say in the future, based on our business performance and the future development and also to better manage our market cap, we would always call on meetings to redesign and talk about the future dividend payout policies. Our goal is to better giving back to our shareholders. [Foreign language]. Now, let me take your third question. So, the question is about the commission and also the -- actually the growth of the passenger volume has a big discrepancy. Why is that? Now talking about our commission, we have different categories of the commission paying out, for example, the departure of the airport service fee and the agent commission for the foreign airlines. [Foreign language]. So, in our financial report, you can see that our commission is not directly linked with the passenger volume. So that is because in our financial booking system, the recognition and the reconciliation of those departure of the airport service fee is not directly linked with the passenger volume. The cost is linked with passenger volume, but the revenue recognition is not because we have to go through a process, including the reconciliation of the count and the recognition of the revenue. So that's why it sometimes have a little bit deviation from the passenger volumes. [Foreign language]. But if you look at the year-round number and also cross years, the commission, the overall commission rate is according to our business volume. So, they echo with each other. That's all for my answers. Thank you.
Operator: Now the next question is from the DAIWA Capital Mr. Liu Wei Chen. Please connect to Mr. Liu.
Kelvin Lau: [Foreign language]. Oh, thank you very much. My name is Kalvin. I have three questions, before I ask my question I also want to congratulate on the senior management team, and congratulations on the wonderful performance for the first half of the 2024’s performance. I have three questions. Question number one, which is about the tax. We do see the tax increase is more than the profit increase. Why is that and what would be the outlook for the later half of the year for the tax? And the second question is the other cost we do see the other cost has declined a lot. What would be the momentum for the later half of the year on the other cost category? And the third question is about the equity incentive plans. So, what would be your latest update on the equity incentive plans? Any updates for this year? Thank you.
Yu Xiaochun: [Foreign language]. Yeah, thank you very much for your question. The first and the second question will be addressed by Mr. Jung, and the third one would be addressed by, Mr. John.
John Xue: [Foreign language]. Well, thank you very much. To answer the first question related to tax, I actually say in China, the corporate income tax rate is usually 25%, but we are named as a national high-tech company. We enjoy 15% favorable corporate income tax, and if we were named as a national key software corporation, we get extra 5% of the tax favorable cut on the tax rate. As you know, the current, if you look at our financial report, our current tax rate is 15%, which is already the, favored high tech business corporate income tax. As for the extra 5% national key software, corporations tax cut, we need to apply it and usually it'll be approved for the later half of the year. And that that tax -- favorable tax cut can be recognized for the later half of this year. [Foreign language]. So, I should say the favorable annual round 10% corporate income tax would be the best tax rate we can get from the government. And this also have reflected the national, attribute a lot of importance to our business. We have been very proud to say, as a national key software corporation and the high-tech corporation, we really enjoyed very good favorable tax rate from the government. [Foreign language]. Now, the second question, which would be the massive cut on the other operations cost. The major reason is that we have booked the agent's commission. We, which are the payable to the agents to other expenditures under the corporate business management. The reason is that because of the payment transaction business, by nature, it's a semi-final service business. So, it's not appropriate to put it as our core business. And also, due to the business strategy readjustment on the payment business, the total cost on the payment business have been declined massively for the first half of the year. [Foreign language]. Another change is because the Phase two construction business of our industrial park, due to some approval and some other factors, and we had some expenditure booked under other expenditures. But for year-round, I should say the other business expenditure and the cost would go up for year-round. Thank you.
Yuan Leifeng: [Foreign language]. Well, my name is Yuan Leifeng, I'm from the HR Department. Now let me take your question which is related to the equity incentive plans. So overall speaking we have been very proactively pushing forward the equity, incentive plans for the employees and the management, and we keep very close relationship and communication with the regulators, and now all these factors - all these measures are being pushed forward in a steady way under the regulations. [Foreign language]. Whether those equity incentive plans can be granted within 2024, we are waiting for the regulators' approval and recognition of that. So, we will keep a close communication with the regulators, and as long as we received further information, and we would -- very soon we would disclose the relevant information to the public.
Operator: Now the next question is from Mr. Julie [ph]. The question is about the profit growth. In the past, the general management already gave a guidance of profit growth about 10%. So, for year-round, will you readjust this number? Thank you.
Yu Xiaochun: Well, thank you for the question. Let's invite Mr. John to answer it.
John Xue: [Foreign language]. Thank you for the question. After COCID, we do see that the business of the civil aviation had re-bounced back very quickly, and we also see that our performance would be greatly pushed up. [Foreign language]. For the first half of the year you'll already see 14% of the growth of our business, and I have to point out that the same period of last year, the growth was very robust. So, this growth was achieved based on the high base of last year. Now, if you look at the year round, I should say the business growth would be even better than the first half of the year. However, we also need to point out that the expenditure and the cost would also be higher. That is because the nature of our business and also some of the cyclical and some other factors tied to that. So, we would have a higher cost for the later half of the year. [Foreign language]. As a technical and especially the high-tech corporation in terms of our cost structure, the labor cost, and also the technical support cost would account for a major part of the total cost. Due to some of the technical project, which is related to the labor, R&D and the technical support cost. Usually we would have a cycle from initiating such a project to the implementation, then to the settlement and to the expenditure and the booking of expenditure. So that's why usually the some of the expenditures occur in the later half of the year. [Foreign language]. Actually, last year, that was the first-year post COVID we had already offset some of the work we need to do during COVID. Now this 2024 would be the second year after COVID, and we would continue achieve faster growth as for the second year. That's all. Thank you, very much.
Operator: Now the next question is from the Huatai Securities. Mr. Xiaofeng Shen Now please connect to Mr. Shen.
Xiaofeng Shen: [Foreign language]. Well, thank you very much. I have two questions. The question number one is about overseas expansion. We do see the domestic business recovered very quickly and you achieved good results for the first half of 2024. For example, the system integration and other business, they all grow very well. So, my detailed question is, what is the expansion plan for the overseas business? Any opportunities as well as challenges. There are some termination of the foreign carriers about their roots flying to China. So, would that be a challenge? The second question is about the strategic new and the industry's business. For example, the AI as far as I know you already proactively attributed to R&D and AI. And also, what are the implementations of the AI scenarios, as is there any milestones of the achieving the AI enabled business and what will be the future opportunities to generate more revenue from this related business? Thank you.
Huang Rongshun: [Foreign language]. This is Chairman Huang. I would like to answer your question related to the overseas expansion. Well, talking about overseas market expansion, we do have very good strategies, for example, occurring with the state government Belt on road initiatives. We would like to expand more to the belt and road regions. And secondly, for the Chinese companies going overseas, we also want to join hands with them to better collaborate and achieve multi win for the Chinese enterprises going global [Foreign language]. Now the second would be further promotion and marketing of rose quite competitive products and services especially in the Asia Pacific region. For example, our PSS services and the airport departure business and also distribution business, they are very competitive and we want to do more promotion and marketing for those products and services. [Foreign language]. And thirdly, to better enhance our service capabilities by optimizing our service capabilities and especially implementing more strong local service power and service capabilities. Talking about opportunities and challenges, we believe there are more opportunities than challenges, especially, firstly, we believe there are a lot of opportunities tied to the Belt and Road initiatives. And secondly, with more and more Chinese companies going global and there will be more opportunities for them to build overseas airport and then we would like to join hands with them to contribute more to building overseas airports. [Foreign language]. And secondly, we have implemented very successfully for some of our product and services in overseas airport. For example, last year in the Cambodia airport, we have implemented a very good platform. And also, in the Macau, CUPPS, we have greatly improved and implemented this project. So, in this way, we already had a lot of know-hows and experiences in exploring the overseas market. [Foreign language]. And thirdly, in 2024, we do see the international routes will continue to thrive and we believe this would boost our confidence level in achieving better results in the overseas expansion. And fourthly, this year, we have successfully participated in the AACO Alliance and this would push forward the TravelSky's business in the Arabic countries and the AACO would be a great win for our business. [Foreign language]. Now talking about challenges, I should say we also face with a few challenges in the overseas market, the other GDS distributors, and we need to improve our business functionality and service to win the competition. The second would be we need to recruit more talents, especially those high-end talents, knowing better about the overseas market in terms of the overseas economy, political and tax and other business-related talents we need to have more talent pool. [Foreign language]. And the third challenge would be we need to build more service experiences in overseas countries. Currently, our accumulation of experience are still limited and also the business scope is still limited in basically more Asian countries. We need to expand outside of more Asian countries, Overall speaking, we would like to seize the business opportunities and face with rose challenges and we wanted to expand more in the overseas business. Thank you. [Foreign language]. You have another question, which is related to some of the foreign carriers who exit the China market or cut the numbers of the, aircrafts to China. We also made thorough analysis over this and how would that affect our business. Although there are some foreign carriers who already announced they are going to cut some of the routes or stopped flying some of the routes to China. However, I should say the implementation and the impact is limited. And we did some internal analysis of how much would that affect our business. I should say their business percentage in our total portfolio is very much limited and the volume is very much restricted to only million. [Foreign language]. So that's why it would have very slight impact on our business. [Foreign language]. Now for your third question, how would we deploy our business in the thriving and strategic new business? Actually, last year, at the end of last year, based on the market new trends, we designed a work report on these regards. I should say, that work plan is based on -- with the -- accelerating the deployment of the strategic new industries, and also based on the practical implementation practice of our TravelSky. So that's why we designed such a work plan. [Foreign language]. Now we designed a 1 plus 3 plus X strategy to best to better specify this strategy. The one means the new generation information technology system. Three means the industrial software, the AI and the renewable energy automotive market. And the X means the future internet and the future business. So, we designed this 1 plus 3 plus X strategy. Now, based on the 1 plus 3 plus X strategy, we had come up with 12 key focuses of the projects, especially in the AI sector in terms of the artificial intelligence. Because we leveraged on the high-quality data and high-value implementation scenario of the CV aviation industry, we already had made very good implementation. [Foreign language]. Let me give you one example, which is our mobile solution based on our mobile technology corporation of TravelSky. We come up with the big model, which is called --, and it has been greatly implemented in the APP and also the large airport, including the -- airport. So, this would be a very good AI tool for the travelers to leverage on its AI-based functionality. [Foreign language]. And also, we are proud to say that this APP actually give a lot of very good functionality, including the customer service, functionality and also the assistance of the TravelSky APP and also assessment solutions. And we are proud to say we are the first number of company who had this being registered and approved by the state government as a large model. Now talking about pushing forward, the industry's implementation especially, the smart implementation of those AI models in terms of customer service and also the luggage assistance robots, as well as some other services we have better leveraged on the AI functionality and improved the AI enabled solutions. Now, in the future, I should say, we would design a holistic planning based on the 1 plus 3 plus X strategy and the 12 key focuses, and we would quicken our steps in enabling the AI and smart-based solutions. Thank you.
Operator: The due to time limit, we have to take the final call and the last call is from the Guotai Securities. Mr. Yue Xin now let's connect to this line.
Unidentified Analyst: [Foreign language]. Well, thank you. I have two questions and the first question is about the cost side in terms of the profit and also the business growth of this company. I should say, I would want to congratulate on the senior management because the first half of 2024 the performance is beyond people's expectations. So that's why the share price increase reflected the recognition from the capital market. Now, my first question is, although the, for the business revenue side, we really have a lot of confidence in the company because the business recovered and also your revenue also recovered. However, on the cost side as a senior management had already said the later half of the year, the cost side would be bad. It would be higher than the first half of the year. But how much higher would you elaborate on this? And also, if we compare that before COVID level, would the later half of the year's cost appreciate at the same level as the 2019 before COVID level? So, what would be the outlook? Now the second question is about the net margin on the ROE, the net margin on the ROE before COVID was very high and very stable. Would that after COVID, do you think that is achievable? What would be the net margin at the, when would the net margin get back to the 2019 level, especially considering the compensation had gone up? And also, we do see that there are some other factors which affect the net margin. Thank you.
Unidentified Company Representative: [Foreign language]. Now thank you for the question. As for the outlook for the profit of this year, as you know, according to the nature of the business, the first half and the second half, the cost may vary in terms of the cost. Our major cost is about labor, R&D and also technical support cost. Because we are a high-tech platform. Now talking about the revenue side, we have achieved a very good revenue growth for the AIT and the area carriers-related business. For the first half of the year, we achieved 24% of the good growth. And for the year round, we are very confident we would continue to achieve good revenue growth for the whole year. And also, for the sustain integration, we achieved the positive growth for the first half of the year, and the year-round business would also be stable. However, in terms of the cost, I should say the labor technical support and assisting integration cost would go up for the later half of the year. However, if we combining the revenue and cost together, we should say for the year round in terms of the profit, we can keep a very good profit and keep the profit gross as well. [Foreign language]. Now for the second question, you know, a lot of investors are very curious to see when can we get back to the before COVID, like the 2019 level in terms of the profit? In terms of the revenue, I think it's just a matter of time. Now, I would like to report to all the investors, from the following angles. The first would be external environment. Now, talking about the Chinese economy, it has been steadily growing post-COVID Even during the most difficult years, the Chinese GDP had maintained a 5% growth. Now, if we look at the historical rules and principles that for the last 20-years, our TravelSky’s business would grow together with the passenger volume growth and also the turnover growth of the Chinese civil aviation business. Now, if you look at history for the past decades, Chinese GDP experienced double-digit growth. Even when we get to the new norm of the economic growth, we still achieved 5% of the GDP growth. Usually the Chinese civil aviation industry would outpace the GDP growth by two percentage points. Now, intrinsically, we should say we are also a very competitive business because if you look at our nature of the core business, we are a software company. We are also a platform-based company. For example, during the three years of the COVID, all the industries are suffering loss, but we actually are making good profit. If you look at our core advantages in the whole value chain, you can see that we enjoy low cost. And if you look at our business revenue, which was very stable, so that's why we are categorized as cash cow business by the capital market [Foreign language]. Although we should say the external environment always have ups and downs, but we are very confident, especially in the modernization of the Chinese economy, in the development of the Chinese civil aviation industry and the tourism business, and as the passenger, you know, turn over business. So, we believe that we, our business will continue to grow. [Foreign language]. The national state government designed a two-step strategy. By 2035, we would achieve a basic modernization. By 2050, we would achieve a well-off society with full modernization. So, based on this backdrop, I firmly believe that our company would achieve steady and continuous growth. So, as for the question of when can we recover back to the 2019 before COVID level, I think it's a matter of time and the time will not be long. Now, talking about the gap between the cost of the first and the second half of the year, I should say the gap would be more balanced this year. So that would be a more balanced picture this year. In conclusion, the management is full of confidence about the future of our business. Thank you very much.
Yu Xiaochun: [Foreign language]. So dear friends, thank you all for your questions. Due to time constraints, we will conclude the Q&A session here. To better serve you, we invite you to scan the QR code on the screen and complete our feedback survey for this meeting. We highly value your suggestions and options opinions. In the future we will actively organize and participate in both offline and online communication events. If you have any further questions or concerns, please feel free to reach out to our investor’s relations team for further discussions. We look forward to our next meeting. Finally, I would like to express our heartful thanks to everyone for your attending and participation, and to our chairman management team and colleagues across departments for this time. And we would also appreciate the assistance of our financial advisors in organizing this meeting, as well as the support of the roadshow platform and the interpretation. And this concludes today's meeting, ladies and gentlemen thank you very much.
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