Domestic head film and television production and distribution company + streaming media platform, upstream and downstream integrated layout. The company sets the integrated layout of production, distribution and broadcasting. Since its establishment in 2007, Ruyi Film has successfully produced a series of high-quality film and television cultural works, which is a head film and television production company in the industry. the positioning of the works takes into account both ideological depth and public aesthetics, telling Chinese stories and spreading Chinese culture through film and television works, including the TV series Nirvana in Fire 1, No War in Peiping, and the film Hello. Li Huanying sent you a little red flower and so on. The company's streaming media platform pumpkin movie positioning vertical pure payment subscription system, established in 2015, through the analysis of users' viewing behavior of intelligent recommended content, to achieve customized content production, the main income includes copyright operation, member income.
The new layout of the game business, long-term and medium-term join hands with the major shareholder Tencent to explore the movie game linkage space. In January 2022, the company signed an agreement with Tencent to obtain the technical and channel promotion support provided by Tencent for the company's game products, which was operated by Shenzhen Jingxiu, a subsidiary of Ruyi. 5.26 the first mobile game "vying for the Deer in troubled Times" was launched, and its performance exceeded expectations after it was launched. According to the company's announcement, it reached 100 million in less than 2 months and made a good start. The mobile game "legendary World" is expected to be launched on July 26, after performing well in the test phase. The company cuts into the game business in the way of operation, and the good cash flow of the game will feed the main film and television industry. After the film and television IP continues to accumulate and the game operation experience is rich, the certainty of exploring the film-game linkage will increase, which will also help to extend the life cycle of IP.
In the film and television streaming business, the company always emphasizes the producer-centered system, attaches importance to the script link, and accordingly has a better ability to control the cost. In terms of production factors, a good script has a higher weight in Confucianism, and the ability of the producer accumulated in the process is the company's core intangible asset. With the continuous promotion of financing and the replenishment of game cash flow, it is expected to enlarge the management leverage of excellent producers through capital leverage to improve film and television production capacity.
Profit forecast and investment advice: China Ruyi's operating income is expected to be 24% CAGR from 2023 to 2024, and the corresponding return net profit CAGR is 30%. We give China Ruyi a valuation of RMB 26.429 billion in 2022 according to the SOTP method, which is calculated at the exchange rate of RMB against the Hong Kong dollar on July 23, corresponding to the target price of HK $3.28. Cover for the first time, giving a "buy" rating.
Risk tips: uncertainty of regulatory policy; repeated epidemic situation, delayed online rhythm of content; release of game version numbers is not as expected, or the epidemic affects the progress of game development and testing.