Crafted quality dramas with ingenuity, it quickly grew into a leading national drama label.
Ning Meng Film and Television is a leading drama company that continues to create high-quality series based on rich copyright IP reserves. In 2019-2021, 6 of the 8 copyrighted dramas broadcast by the company were high-rated dramas, and the proportion of top dramas reached 75%, not only far exceeding the industry average, but also exceeding the average of the top five competitors of 45.9% during the same period. The premium copyright drama business contributed to the company's main revenue source. In 2021, it relied on licensing revenue of 1,051 million yuan from copyright dramas, accounting for 84% of total revenue. The company ranked fourth among all domestic drama companies in terms of revenue in 2021. The film and television industry was subject to strict content regulation in 2020-2022. Coupled with the pandemic, the company's revenue side declined somewhat, but after adjusting the net profit scale, continued profit was achieved, and operations were relatively stable.
Regulations have stabilized, the epidemic has subsided, and the film and television industry is about to pick up.
In addition to the content industry being seriously affected by the pandemic, the strong regulation that began around 2018 has continued to improve significantly (games, film and television, internet platforms), and a new round of computing platforms (VR, metaverse) is also expected to bring incremental expectations — new growth after the mobile internet traffic dividend peaked around 2018, and the content industry is expected to start a new cycle of boom in 2023. Since October 2022, there has been an increase in the number of costume drama filings, showing a recovery trend. We expect the regulatory environment in 2023 to enter a new period of stability. Currently, film and television companies and video platforms in the industry have adapted to the pace of regulation, compounding the supply-side driving post-pandemic recovery, which favors the recovery of the film and television industry and companies' performance.
Premium content continues to expand its leading advantage, and diversified monetization frees up development space.
Ning Meng's film and television business covers series investment, production, distribution, promotion, derivative licensing, etc., to build a diversified revenue system. As the core of the company's current business and the driving force for future growth, high-quality copyright dramas will develop steadily. Based on content and IP advantages, the company will actively expand content marketing, overseas distribution, etc., with remarkable competitive advantages. 1) Focusing on high-quality copyrighted dramas, the high ratings and episode rate exceeds the industry average: the high ratings and demand volume of high-quality dramas produced by the company bring bargaining power to the company, and the sales price and total gross margin of copyright episodes are higher than the industry average; 2) A systematic content creation and management system that injects impetus into the continuous production of hits: behind the frequent emergence of popular series, it is inseparable from the company's systematic content and creative management system. The pre-sale model brings predictability to revenue; 3) Relying on content advantages to broaden the marketing capabilities of abrupt monetization, Out: Content marketing enables one fish to eat more, and is expected to create new things Growth curve; in addition, the company is exploring new growth channels such as derivative licensing and overseas distribution of drama IPs to maximize the commercial value of proprietary IP property rights.
Investment advice:
Ning Meng Film and Television has the ability to continuously develop premium series and multi-channel distribution, and has pioneered a new model of IP operation based on high-quality content companies to expand content marketing and overseas distribution businesses. Looking forward to the future, the company has sufficient reserves of future copyrighted dramas and IP. The copyright drama business is the core growth engine and will consolidate the advantages of leading brands with premium content; at the same time, diversified monetization channels will free up room for development. We expect the company's adjusted net profit for 2022-2024 to be $142/302/357 million, respectively, corresponding PE to 31/15/12X, and corresponding EPS to $0.39/0.84/0.99. We gave the company 20 times PE valuation in 2023. The corresponding target price was HK$19, with initial coverage and a “buy-A” rating.
Risk warning: policy regulation exceeds expectations, market competition intensifies, and celebrity entertainers are immoral.