CCTV's high-end delivery platform is still the focus of the market, and the development of advertising agency business is still sustainable:
According to the "China economy and Advertising Market Analysis report of the first quarter of 2013" released by Changrong Media, China's advertising revenue in the first quarter of 2013 increased by 11.3% compared with the same period last year, higher than the GDP7.7% growth in the first quarter of 2013, of which radio advertising revenue grew steadily by 13.6%. It is the only advertising platform that still maintains a high speed in the traditional advertising market. In addition, according to CSM statistics, the viewing share of CCTV channels showed an upward trend throughout the day from January to April 2013, especially during the daytime period, which was 2.6 percent higher than the same period last year. We expect that in the future, as an important platform for TV advertising, the growth rate of advertisers will exceed that of other TV advertising platforms. At the same time, the future advertising will continue to focus on the national high-end quality platform, the demand for high-quality platform will continue to exist, I believe that the company's CCTV advertising agency revenue can take advantage of this east wind to continue to flourish.
Bain Capital has completed the reduction of its holdings to improve the company's equity liquidity:
Bain Capital, the company's main shareholder, sold 33.62 million shares of the company, equivalent to about 6 per cent of the issued share capital, on May 9, 2013. since then, Bain Capital no longer holds any shares in the company. The shareholding of the major shareholder in the company has gradually decreased from 21% since October 2012. We believe that this reduces the concentration of the company's equity, strengthens the company's liquidity in the secondary market, and to some extent allays the market's concern about price fluctuations caused by the reduction of the company's major shareholders.
With the cancellation of some column contracting agents, the gross profit margin is expected to increase:
In 2012, the company cancelled some of the CCTV-2 and CCTV-7 column contracting agents, mainly due to unsatisfactory sales performance and low sales utilization. We believe that abandoning the chicken rib column will help to improve the overall quality of the CCTV period contracted by the company, and the company's pure advertising agency business (brand integration business) is expected to improve well under the conditions of the release of advertising input by advertisers in 2013. the gross profit margin of this business is relatively high, so the company's gross profit margin is expected to increase in 2013, which is expected to be about 38%.
Target price of HK $7.16, maintain buy rating:
The current price of China Television Jinqiao corresponds to the forecast EPS of 6.82x PE in 2013, and the historical average PE level is 7.71x. We believe that the future growth of the company is mainly driven by the rebound in demand from advertisers and the concentration of advertising on high-end advertising platforms. According to the future growth of the industry and the company's market position, the company will be given 8 times PE, with a target price of HK $7.16, which is 16% higher than the current price.