The performance is lower than the market and our expectations.
The company announced 1H21 results: revenue of 785 million yuan, an increase of 136.2% over the same period last year, and a net loss of 158 million yuan (compared with a loss of 539 million yuan in the same period last year). Of this total, 2021 earned 497 million yuan, up 714.5 percent from the same period last year, down 50.2 percent from the same period in 2019; the mother lost 6.53 million yuan (459 million yuan in the same period last year). The company's performance falls short of the market and our expectations, and we judge that it is mainly due to the high financial expenses, the recognition of European Cup costs in the current period and the delayed recognition of revenue, and the small contribution of film and television business revenue.
Development trend
The contribution of the European Cup rematch is limited, and the film and television business has not yet fully recovered. The company's 1H21 revenue increased by 136.2% over the same period last year (with a low base in the same period last year). We judged that it mainly contributed to the sports business, including the rematch of the European Cup originally scheduled for 2020 on June 12, 2021, and the normal development of live broadcast of events / sports marketing and other aspects of business, to achieve part of the revenue recognition. Film and television business in the first half of the documentary "the glory of the Mediterranean: the rise and fall of the Roman Empire" (main cast) completed the first round of Tencent video broadcast, the online drama "Love Biological clock" (20%) launched in June, we expect the film and television business to make a relatively small contribution to total revenue. The increase in financial expenses is expected to gradually ease the pressure with the investment of state-owned assets. The company's 1H21 financial expenses were 245 million yuan, an increase of 25.4% over the same period last year, of which the interest expense was 201 million yuan, a slight decrease of 4.5% over the same period last year, and a significant decline has not yet been achieved. The exchange profit and loss of 43.806 million yuan (- 10.798 million yuan in the same period last year) is a new increase in expenses. We believe that with the investment of state assets and the subsequent increase of capital, and through the transfer of voting rights to become the actual controller, it is expected to alleviate the pressure of high debt and financial expenses faced by the company.
The Asian Football Association (AFC) tournament has officially entered the stage of global exclusive rights, and "Happiness to Wanjia" will be broadcast. Looking forward to the second half of the year, with the end of the final 40 of the Asian qualifying tournament of the World Cup, the Asian Football Association has officially entered the stage of global exclusive rights from 2021 to 2028. According to the announcement, a global partnership has been reached with Yili and other brands. We expect to contribute some of the revenue this year. In addition, the company also owns the all-media copyright in La Liga (2019 to 2028), and Xinai Sports, a joint venture between Xinying Sports and iQIYI, Inc., has launched a partnership with the Premier League and owns the rights to the Premier League for the 2020-2021 season, which began broadcasting in August. In terms of the film and television business, the company expects the TV series "Happiness to Wanjia" (20% investment) / "meritorious deeds" (5%) to be broadcast in the second half of this year, and we expect to recognize some of the revenue. In addition, the company also has a number of TV dramas and online dramas are in the post-production and release stage, which is expected to be online next year and beyond and contribute revenue.
Profit forecast and valuation
Considering that the company's European Cup performance contribution is lower than expected, we will reduce the net profit of 2021 / 2022 from 193 million yuan / 221 million yuan to-150 million yuan / 207 million yuan. The current share price corresponds to a price-to-earnings ratio of 17.1 times 2022. Maintain a neutral rating and lower the target price by 7.3% to 6.38 yuan due to the adjustment of earnings forecasts, corresponding to 18 times 2022 price-to-earnings ratio, with potential upside space of 5.3%.
Risk
The failure of voting entrustment and abandonment leads to the failure of the change of the actual controller, the impact of the epidemic exceeds expectations, the performance of the subject matter of M & An is lower than expected, the risk of impairment of goodwill, the risk of impairment of inventory, and the slow progress of film and television projects.
