The delay in the sales of movies and TV dramas caused the performance to fall short of expectations.
1) from January to September 2017, the company achieved operating income of 1.009 billion yuan, an increase of 24.54% over the same period last year, and a net profit of 174 million yuan, an increase of 31.07% over the same period last year, which is lower than the forecast range of China report (199 million yuan to 265 million yuan), corresponding to 0.21 yuan of fully diluted EPS. Of this total, Q3 achieved an operating income of 373 million yuan, a decrease of 6.16% over the same period last year, and a net profit of 41 million yuan, a decrease of 52.60% over the same period last year. The main reasons for the increase in operating income and return net profit in the first three quarters are Xinhua Vanguard, Vanguard, value still Interactive and Aurora Mobile Limited Network. The main reason for the lower-than-expected performance of Q3 is that the films and TV series invested by the company this year have not yet been sold in the current period.
2) the company released its operating performance forecast for 2017. the net profit for 2017 is expected to reach 389 million yuan to 503 million yuan, an increase of 70% to 120% over the same period last year, corresponding to a fully diluted EPS of RMB 0.47 to RMB 0.61, of which Q4 net profit ranges from RMB 215 million to RMB 329 million.
Film games are expected in the fourth quarter, and subsidiaries open a new chapter in their business when the bet expires.
Film and television works such as "Farewell to Las Vegas", "here comes the Police Dog" and "the out-of-stock Man on Orange Street" are expected to confirm revenue in the fourth quarter. "touching Gold" and "Snow and Sand" will continue to verify the company's film and television boutique strength; the company integrates Datang brilliance and Qian Yi Zhicheng film resources, join hands with the top production team, increase content investment, feed its artists, and explore a new "big brokerage" business model. Game plate popular style products "Wu Shen Zhao Zilong", "Journey to the West" hot, reserve works "draw the cup of rivers and lakes do not stop", "unique Fairy King" urgently need to be launched, is expected to continue to enjoy the plate dividend. The completion rate of the bet on the performance of M & A subsidiaries is 100%. With a large number of bets due in 2017, the company is expected to become one of the enterprises with the best integration effect in the target of M & A transformation.
Invest in the establishment of wholly-owned subsidiaries and build an investment platform for the cultural industry
During the reporting period, the company set up Horgos Zhongnan Cultural Equity Investment Company with its own funds, with a registered capital of 300 million yuan, as a professional investment platform for the layout of the cultural industry, and integrated the company's foreign equity investment projects. The establishment of the wholly-owned subsidiary is conducive to improving the company's cultural soft power and cultivating new business growth points.
Investment suggestion
We estimate that the annual EPS of the company in 2017-18-19 is 0.62 + 0.78 + 0.92, corresponding to the corresponding 23-19-16 times PE, which is significantly lower than the average valuation level of the film game sector over the same period. With reference to the valuation level of the comparable company, the company is given a reasonable valuation of 18.6 yuan over a 6-month period (corresponding to a 17-year, 18-year, 30-PE, 24-fold valuation) and maintains a buy rating.
Risk hint
The risk of policy regulation, the risk of M & An integration is not as expected, the risk of marketability of film and TV series and so on.
