Investment highlights:
Affected by customer restructuring in the second half of the year, net profit eventually grew steadily:
The company achieved total revenue of 1,767 million yuan in 2013 (same below), an increase of 8% over the previous year. Gross margin increased slightly by 1 percentage point to 36%. Looking at the business separately, the main business TV media resource operation achieved revenue of 1,671 billion yuan, an increase of 5% over the previous year. Since the company's liquor customers and tourism bureau customers did not continue the momentum of the first half of the year in the second half of the year, the revenue growth rate declined in the second half of the year, but we noticed that the company made quick adjustments in the second half of the year and introduced new Internet customers, including Tencent, Baidu, Alibaba, etc., reflecting the company's excellent ability to adjust; in the end, the company's integrated communication service business saw a slight drop of 2% over the previous year. In the end, this business saw a slight drop of 2% in the business The net commission realized was RMB 4.982 million, an increase of 27% over the previous year. The main reason is that the group's commission rate increased compared to last year; the online media and content management business actually increased 37% year over year. On the one hand, revenue from creative advertising production has been growing steadily. On the other hand, the company's first video program, “Smelling Fragrance and Knowing Men”, was broadcast on Jiangxi TV. The copyright of this program belongs to the company, so it received a high revenue share, bringing new revenue to the group. At the same time, the company also received revenue from building leasing. In the end, the company achieved net profit of 369 million yuan, an increase of 22% over the previous year, which is better than our previous expectations. We expect that the company's CCTV resource operation business will continue to grow well this year as major international events continue to occur.
Build an Internet tourism promotion platform to explore customer value in depth:
The company increased its holdings of Letu Travel Network to 71% in 2013, and will be consolidated in 2013. This website is China's leading online travel media. Currently, it has more than 3.66 million registered users worldwide, with an average of 17 million visits per day, and the peak traffic around Golden Week has reached 20 million. In terms of revenue share, travel customers account for the largest share. With the company's deep integration of this website, it will become a good advertising platform for these travel customers. Currently, the number of advertisements placed on this website is still low, and there is plenty of room for monetization improvement.
The valuation is cheap, raise the target price to HK$7.84. The rating is highly recommended:
The company's advertising time resource operation and advertising agency business will maintain steady growth this year. The Internet and content production business is expected to balance profit and loss for internships this year, and it is also indicated that Letu Network's expenses will increase slightly this year. Since there was significant growth in the first half of 2013, when the national economic situation in 2014 was not optimistic, the performance for the first half of the year is expected to grow only slightly. Net profit for the whole year is expected to reach 440 million yuan. The current price corresponds to the 2014 EPS forecast of 6.34 times PE, and the historical average PE level is 7.71 times that, so the valuation is relatively cheap. We believe that the company has a stable profit model and that the growth rate of performance can be maintained. CCTV resources are still the gold platform for advertising in China, so the target price was raised by HK$7.84, corresponding to 7.7 times PE in 2014, which has room for 22% increase from the current price.