On August 14, Anhui Jiuhuashan Tourism Development Co.,Ltd. received a regulatory inquiry letter regarding their application for targeted stock issuance, with questions raised about their fund-raising projects, financing scale, and operational conditions outlined in their 2025 targeted A-share stock issuance prospectus.
**500 Million Yuan Fundraising Targets Four Core Projects, Cable Car Operations to Expand to Four Lines**
The fundraising initiative encompasses four major projects: the Jiuhuashan Shizifeng Scenic Area passenger cable car project, the Jiuhuashan Julong Hotel renovation project, the Jiuhuashan Central Hotel North Building guest room upgrade project, and the transportation equipment enhancement project, with total fundraising not exceeding 500 million yuan.
Regulators initially focused on the main construction content of these investment projects and their relationship with the company's existing business operations, questioning whether they comply with regulations requiring funds to be directed toward core business activities. According to the company's response, the investment projects center around existing cable car, hotel, and passenger transport operations, representing further expansion and upgrades of current business lines. For instance, upon completion of the Shizifeng scenic area cable car project, the company will operate four cable car lines total, while hotel renovation projects involve refurbishing existing facilities without adding new guest rooms. From a project content perspective, these initiatives indeed align with core business investment requirements.
However, the company has not provided detailed explanations regarding whether these projects might lead to excessive dependence on existing business operations while lacking exploration of new business models.
**Uncertainties Surrounding Shizifeng Tourist Growth, Questions Raised About Replicability of Huangshan and Lijiang Models**
Regulators also required the company to explain the necessity of investment projects and rationality of new capacity additions, considering factors such as visitor fluctuations at Jiuhuashan and Shizifeng scenic areas, hotel occupancy rates, equipment depreciation rates, existing vehicle transportation capacity and capacity gaps, and comparable industry company situations.
In response, Anhui Jiuhuashan Tourism Development Co.,Ltd. provided extensive data, including visitor numbers for Jiuhuashan scenic area in 2023, 2024, and the first quarter of 2025, as well as Shizifeng scenic area's positioning and development potential. The company noted that Jiuhuashan's central scenic area experiences concentrated tourist traffic and significant environmental pressure, while Shizifeng scenic area, as the core ecological sightseeing area, will become Jiuhuashan tourism layout's second core in the future.
Nevertheless, Shizifeng scenic area remains in preliminary development stages, with visitors primarily consisting of hiking enthusiasts, leaving future tourist growth uncertain. Additionally, the company referenced cable car construction situations of comparable industry companies including Huangshan Tourism, Lijiang Co., and Mount Emei Tourism as supporting evidence, but these companies operate in scenic areas with different visitor bases and growth trends compared to Jiuhuashan, raising questions about comparability.
**Cable Car Project Land Use Awaits Auction Process, Land Approval Becomes Biggest Variable**
The Jiuhuashan Shizifeng Scenic Area passenger cable car project's land use still requires completion of auction procedures, with regulators requesting explanations of land auction status, construction progress, and assessment of potential major uncertainties in project implementation.
Anhui Jiuhuashan Tourism Development Co.,Ltd. responded that Shizifeng scenic area cable car project land has been incorporated into Jiuhuashan scenic area's overall land use planning and is undergoing relevant approval procedures. Despite this, land approval processes are often complex and involve local government policy orientations, potentially affecting project timelines if approval progress falls short of expectations. Furthermore, cable car construction inherently involves certain technical difficulties and investment risks, with unexpected developments during construction potentially leading to cost overruns or schedule delays.
**326 Million Yuan Cable Car Project Cost Details Disclosed, Below-Industry-Average Unit Costs Questioned**
Regarding detailed investment composition, calculation basis and processes for investment projects, and comparisons of unit engineering costs and equipment unit prices with company existing projects and comparable industry projects, Anhui Jiuhuashan Tourism Development Co.,Ltd. provided detailed investment compositions for each project and comparative data with company historical projects.
For example, the Shizifeng cable car project's total investment amounts to 326 million yuan, including 112 million yuan in construction engineering costs and 145 million yuan in equipment procurement costs. The company stated that unit engineering costs and equipment unit prices remain basically consistent with past company projects and below industry average levels.
However, the representativeness of such comparisons requires further verification, especially considering differences in geographical conditions and construction difficulties across different scenic areas. Additionally, future increases in construction material or equipment prices could lead to rising project costs, affecting investment returns.
**Annual 15% Growth Prediction for Cable Car Ridership Draws Attention, Hotel Occupancy Rate Improvement Logic Questioned**
Regulators also required explanations of prediction bases for key indicators in investment project benefit forecasts, including unit prices, customer volumes, gross profit margins, and net profit margins, with comparisons to company current situations and comparable industry companies to assess whether benefit predictions are prudent and reasonable.
Anhui Jiuhuashan Tourism Development Co.,Ltd. responded that the Shizifeng cable car project expects 224,000 cable car passengers in the first year after completion, with 15% annual growth thereafter, stabilizing in the 15th year. The reasonableness of this growth assumption requires evaluation in conjunction with actual tourist growth at Shizifeng scenic area.
The company also referenced cable car operational data from Huangshan Tourism, Lijiang Co., and other companies as reference points, but these companies operate in scenic areas with different visitor bases and growth trends compared to Jiuhuashan, raising questions about comparability. Additionally, hotel renovation project benefit predictions primarily rely on occupancy rate and unit price improvements, but intensified market competition could lead to hotel revenues falling short of expectations.
**Rising Depreciation Expenses, Project Risk Warnings Lack Quantitative Analysis**
Regulators also requested explanations of new asset depreciation and amortization situations from investment projects and their impact on company future operating performance, along with improved risk warnings. Anhui Jiuhuashan Tourism Development Co.,Ltd. indicated that new asset depreciation and amortization from investment projects will have certain impacts on company future operating performance, but remain overall controllable.
However, as asset scale expands, increased depreciation expenses may pressure company profitability. Additionally, while the company mentioned relevant risks in responses, risk warning content remains relatively general, lacking specific quantitative analysis, making it difficult for investors to assess actual project risks.
**Low Asset-Liability Ratio Provides Financing Confidence, Cash Flow Calculations Insufficiently Disclosed**
Finally, regulators required explanations of financing scale rationality, considering monetary fund and financial asset balances, daily operational cash inflows, funding gap calculations, and asset-liability ratios. Anhui Jiuhuashan Tourism Development Co.,Ltd. responded that the company maintains a low asset-liability ratio with strong debt service capability, and investment funds will primarily support project construction without significantly impacting company financial conditions.
However, the company has not provided detailed explanations of cash flow situations over coming years or potential additional funding requirements. Furthermore, if investment projects fail to reach production as scheduled, this could lead to inefficient capital utilization, affecting overall company financial performance.
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