Event: the company released its annual report for 2016, with an operating income of 1.34 billion yuan in 2016, an increase of 19.68 percent over the same period last year, a net profit of 229 million yuan belonging to shareholders of listed companies, an increase of 64.05 percent over the same period last year, and basic earnings per share of 0.30 yuan. The company also released its quarterly report for 2017, with operating income of 241 million yuan in the first quarter, an increase of 72.70% over the same period last year, and a net profit of 32.5655 million yuan belonging to shareholders of listed companies, an increase of 118.84% over the same period last year.
Comments:
1. With the deepening of the transformation, the overall performance of film and television, artist brokerage, copyright operation and games has greatly increased.
In 2016, the company completed the acquisition of Xinhua Pioneer and Vanguard Interactive, achieving a consolidated performance statement, with new copyright operation and game business added to the statement, of which Xinhua Pioneer and Vanguard Interactive made a net profit of 38.4 million yuan and 99.36 million yuan, respectively. In addition, Datang brilliant realized a net profit of 161 million yuan, while Qianyi Zhicheng realized a net profit of 35.84 million yuan.
In terms of products, the operating income of the financial products business decreased by 11.94% compared with the same period last year, and the gross profit margin increased by 1.45% to 22.36%; the revenue of TV series business increased by 9.08%, and the gross profit margin increased by 3.18% to 49.73%; the income of artist brokerage business increased by 23.75%, and the gross profit margin increased by 0.92% to 72.36%. The profitability of film, television and artist brokerage business has improved, and the endogenous merger table has led to a big increase in performance in 2016, and it is expected that a new Aurora Mobile Limited network will be added in 2017.
2. Start the transfer of manufacturing business and firmly deepen the strategy of "big culture".
In order to straighten out the business structure and facilitate the management of capital operation and cultural media business, the company launched all assets, creditor's rights and liabilities and personnel transfer related to the manufacturing business in February 2017. We judge that this transfer is the first step to start the divestiture of the manufacturing business, and the subsequent divestiture is worth looking forward to, which also reflects the company's firm determination to deepen the "big culture" strategy. In addition, at the end of 2016, the company appointed Mr. Hong Tao, a senior figure in the film and television industry who was once director of the film and television channel of Jiangsu Radio and Television Station and general manager of Happy Blue Ocean, as general manager, and the promotion of the grand cultural industry in 2017 is worth looking forward to.
3. Take artist education and art vocational education as the starting point to build the Central South Star Dream Factory.
The company cut into the undergraduate education of artists through cooperation with Nanjing Institute of Arts and the people's Government of Jiangyin City, and jointly set up an international college of film and television training in 1905 to enter art vocational education. The layout of the company's education can be organically combined with internal IP resources such as films and TV dramas. On the one hand, artist education and art vocational education train relevant professionals for the company's television, film, brokerage culture, content production, etc. On the other hand, the company can win the popularity of artists through the resources in hand, and build the brand of Zhongnan Star DreamWorks. In the future, the company will take artist education as the guarantee and try to realize through content. After becoming famous, artists are expected to bring more resources for content cooperation to the company.
4. The source of IP content is the core, and the pan-entertainment business develops in coordination.
Through investment, mergers and acquisitions and other capital operations, the company owns pan-entertainment industry chain entities such as Central South Film (film), Datang brilliant (TV series), Qian Yi Zhicheng (artist brokerage), Xinhua Vanguard (source of IP), Central South Music (music), value still Interactive and Aurora Mobile Limited network (games). Internal synergy integration is beginning to bear fruit, and IP realization is about to enter the harvest period. The opening of downstream cash channels will also continue to promote the continuous expansion of upstream space such as star training and art education, and accelerate the promotion of pan-entertainment business.
5. Profit forecasts and investment suggestions:
We expect the company to prepare for EPS in 2017 / 18 (the performance is prepared in accordance with all the targets to be acquired, and the equity is calculated according to the reserve price of the funds raised), respectively. 0.94 yuan, we are optimistic that the company will be based on star training, and continue to recommend it to open up the prospect of pan-entertainment layout of IP, film and television, artist brokerage, music and Internet, as well as the continuous layout expectation of future follow-up strategy.
Risk factors: 1, the integration effect of M & A target is not as expected; 2, the performance of M & A target is much higher than expected.
