Main points of investment
The growth rate was lower than the market expected. During the reporting period, the company achieved an income of 5.215 billion yuan, an increase of 34.27% over the same period last year, and a net profit of 214 million yuan, down 37.60% from the same period last year. The increase in revenue was mainly due to the consolidation of advertising business and related extension. The decline in net profit was mainly due to the decrease in investment income compared with the same period last year and the fluctuation of gross profit margin in the process of Internet transformation, and the growth rate was lower than market expectations.
Income maintains high growth, and the transition process experiences profit fluctuations. Since 2014, the company has transformed Internet new media groups in a series of epitaxial and endogenous forms, driving rapid revenue growth, which increased by 34.27% year-on-year during the reporting period. The gross profit margin was 28.67%, 2.23% lower than last year, the management expense rate was 16.98%, 1.69% lower than the same period last year, and the sales expense rate was 6.83%, a slight increase of 0.31% over the same period last year. The main reason for the lower profit margin is that the company experienced profit margin-related fluctuations in the process of transforming the Internet, and it is expected that the profit margin will pick up after the relevant targets enter the steady development.
Create an integrated media content platform, and the layout of new media transformation continues to advance. During the reporting period, the company focused on building a media content platform integrating films, TV dramas and variety shows, which has been initially completed.
The company partnered with Lionsgate Pictures in "amazing rogues 2", "Egyptian gods", "prisoners" and "choices".
On the other hand, the company continues to promote the transformation of new media. At present, the company's proposed acquisition of Anwo Media and Shanghai Jiuyou are still preparing for the second feedback and are expected to land in the fourth quarter.
Major shareholders to increase their holdings to show confidence, endogenous extension to create a new Internet media group. According to the company announcement in July 2016, the controlling shareholders of the company increased their holdings by a total of 18 million yuan, accounting for 16.66% of the company's equity after the increase. This increase shows that the major shareholders have strong confidence in the follow-up development of the company. In the future, through endogenous extension, the company is expected to pay attention to endogenous growth and create its own vertical entertainment ecology, on the other hand, it will continue to acquire high-quality Internet new media targets and build Internet new media groups.
Risk factors. Macro-economic system risk; M & A process risk and M & An integration business management risk.
Profit forecast and valuation. Taking into account the slower-than-expected pace of the company's transformation and the decline in profit margins during the transition, we downgrade the company's 2016-18 EPS forecast of 0.34.0.43 yuan 0.54 yuan (the original forecast of 0.52 pounds 0.62 pounds 0.71 yuan), the current price is 15.98 yuan, corresponding to 2016-18 PE is 47-37-30 times. Downgrade the company to "overweight". Using the distributed valuation method, we believe that the reasonable market capitalization space for the company's cable business, advertising business, film and television sector, Internet business, investment management and tourism business is 13 billion yuan, 4.3 billion yuan, 2.9 billion yuan, 4.3 billion yuan, 3.8 billion yuan and 1.1 billion yuan respectively, with a target price of 19.34 yuan, corresponding to 45 times the PE in 2017. In view of the relatively low valuation of the company, the leading position of the media in the reform and transformation of state-owned enterprises and relying on top resources such as Hunan Radio and Television and BABA, we suggest that investors can still pay attention to the medium-and long-term investment value of the company.
