Main points of investment
Event
(1) our previous focus on the exclusive recommendation of the target, Lugang Culture share price in recent days with a volume breakthrough, the stock price reached a new high for half a year. (2) recently, the company announced that Tianyi Film and Television (hereinafter referred to as "Tianyi") has completed the industrial and commercial change. after the change, the listed company holds a 96% stake in Tianyi Film and Television.
Analysis
1. We reiterate the view that 3Q17 is the periodic bottom of the company's fundamentals, and 4Q17 starts that the fundamentals will enter the upward range.
two。 The fundamentals of the company are getting better: 4Q17, Tianyi 2017 key project "good Life" performance will confirm the report, "good Life" 45 episodes, the sale price is 8 million yuan per set, the cost is about 200 million yuan, the investment proportion is 60%, and the estimated net profit is about 7000. The project accounts for about 70% of Tianyi's estimated net profit in 2017. In 2018, Tianyi promised a 20% increase in net profit over the same period in 2017, and "Cao Cao" began shooting. The net profit promised by God in 2017, 2018 and 2019 is not less than 100 million, 120 million and 150 million respectively.
3. The cash held in the subsequent sale of Tianyi shares will increase the secondary market: the follow-up supporting plan is conducive to protecting the stock price of the secondary market. This time, 45% of the shares are sold at a price of 395 million. The announcement said that the transferor Xinyu Shangshan Ruoshui (Wu Yi holds 92.32% shares in Shangshan Ruoshui) and Wu Yi promised to buy no less than 5000 shares of Wanlu Port Culture in the secondary market through bidding and bulk trading in the future. At today's closing price of Rmb6.56 per share, 50 million shares require 328 million (83 per cent of their cash holdings), which we believe will provide a strong support for share prices in the secondary market.
Investment suggestion
We maintain our forecast of Lugang Culture's net profit of 250 million in 2017 (of which textile business is 90 million) and no less than 370 million in 2018 (of which textile business is 100 million). The current stock price corresponds to the 2017 PE23.6x and 2018 PE16.0x respectively, reiterating the "buy" investment advice.
Risk hint
Increased competition in the textile industry and the risk of exchange rate changes. The revenue of the boutique TV series fell short of expectations.