Incident: On March 13, 2023, Qiancheng Baina announced that it was the first ecological partner of Baidu Wenxin Yiyuan (English name: ERNIE Bot), and will fully experience and integrate Wenxin Yiyuan in the future.
In 2023, the company's series and film business has a rich product line and is expected to recover rapidly. Among them, the proportion of film project revenue may increase rapidly. Affected by the schedule of film and television projects, the company's 2022 performance declined. The company has the ability to produce quality content, has a rich pipeline of movies and series works, and the project progress and scheduling are relatively smooth. We expect the company to launch 6 film projects and 8-10 series projects in 2023. The accelerated release of the projects is expected to drive the recovery of the company's performance.
At the same time, the company used the industry's low period to gather and bind outstanding film talents to buck the trend and expand and upgrade creative teams. Currently, film projects mostly appear as “main investors and controls”. The revenue potential of the film business is expected to be unleashed at an accelerated pace, and the revenue share of the film business may increase rapidly.
The development of AIGC technology has efficiency innovation value for the content production industry, and will empower Baina Qiancheng's animated film business in terms of visual effects, production efficiency, and production costs. The development of AIGC is expected to empower content production, accelerate the improvement of content production efficiency, reduce related costs, expand IP value, or evolve into an important infrastructure for cultural and creative industries, and accelerate productivity innovation and business model evolution in the content industry. AIGC has cost reduction and efficiency value for the film and television industry. It will empower the animation film business of Baina Qiancheng in terms of visual effects, production efficiency, production costs, etc.: 1) For large, complex scenes in the film, can be used through AI painting to create more detailed, beautiful, and vivid effects. The visual experience is stronger than the artist's frame-by-frame production; 2) Referring to the industry's leading animation film production cycle, which is long, AI-driven can effectively reduce production time. At the same time, the compression of production time will also help the team focus more on early script polishing, etc. The creative process helps improve content quality; 3) AI-driven reduction of reliance on manpower, including shortening the production cycle, helps control production costs. Furthermore, the development of AIGC is also expected to empower the company's marketing business.
Investment suggestions: The company has stable high-quality content production capabilities, rich channel resources, and diversified project reserves. In 2023, the company's production capacity is expected to be released at an accelerated pace. In the future, AIGC technology development will help the company improve productivity and profit levels. We expect the company's net profit to be $17 million, $301 million, and $405 million respectively in 2022-2024. Corresponding to the current stock price PE is 404X, 22X, and 17X respectively, covered for the first time, giving it an “increase in holdings” rating.
Risk warning: The progress of the project fell short of expectations, the box office of film productions fell short of expectations, the strong regulatory policies of the film and television industry exceeded expectations, technological progress such as AIGC fell short of expectations, and there was a risk of loss of marketing business customers.