Events:

The company announced on January 15, 2018 that it is expected to achieve a net profit of 200 million to 250 million yuan in 2017, an increase of 11.66 percent over the same period last year.

Comments:

1. Major projects landed, and the performance of the main business increased significantly in 2017. The company's film and TV drama performance in 2017 mainly came from the Legend of Ba Qing (formerly known as "win the World", the price of a single episode is about 14 million, a total of 75 episodes), "the full moon", "plan", "Dear, long time no see", "Emergency Department Doctor" and other boutique dramas. According to the company announcement, the "The Voice of China" project in 2017 had an impact of about 140 million yuan on the company's profit and loss, including the US $18.75 million license fee paid and the impairment of related taxes and fees and the related expenses for preparing the "The Voice of China" project. After deducting the impact of the "The Voice of China" project on the company's performance, the company is expected to achieve a net profit of 340 million-390 million yuan in 2017, an increase of 89.82 percent over the same period last year.

two。 In the short term:

The high growth in performance comes from the fact that the company has entered a period of rapid growth, and the number and scale of projects have increased significantly. After deducting the influence of "The Voice of China", the performance grew by about 100% in 2017. And according to the progress of the project announced by the company, the project income of "win the world" overseas and satellite TV two or three rounds, "that year blossoms" overseas and satellite TV two or three rounds, "Feng Zicai", "We are young in wartime" and other projects are expected to be confirmed in the first half of 2018. Year-on-year low base is expected to achieve ultra-high growth, break through the seasonal shackles And the company's existing and planned startup projects such as "East Palace", "Anaya Love", "lone throwing tenderness" and "Vermilion Bird" are expected to promote the company's sustained high growth from 2018 to 2019.

3. In the long run:

The main contents are as follows: 1) the production and distribution capacity is outstanding, and the reserve projects are rich and continuous. Since its inception, the company has produced dozens of TV dramas, most of which are broadcast in prime time on satellite TV channels, and a number of works have won the first place in the same period of time. According to CMS data, in 2010, the company's "Eternal Wave" was broadcast on CCTV's comprehensive channel, ranking first in the same period of viewing; in 2012, the company's "Glorious Land" was broadcast in Beijing TV's prime time, ranking first in Beijing's prime-time TV ratings; in 2014, the company's "after Naked Marriage" was broadcast on Zhejiang Satellite TV, ranking first in the same period of time. At the end of 2014, the company's boutique drama "the Legend of Wu Mei Niang" received more than 10 billion online hits. On its first day of broadcast, the national network watched 2.14, with an average rating of 3.1. The finale ranked first in the same period, ranking first in the same period of time. It has become the TV series with the highest ratings except "in the name of the people" in the past decade, and the company's boutique production ability has been recognized by the industry. According to the company announcement, the 2017 company's boutique drama "winning the World" was broadcast by Youku, Jiangsu Satellite TV and Oriental Satellite Television. The total price of the first round broadcast rights of Internet and Satellite TV was nearly 14 million yuan, of which the price of the first round broadcast rights of satellite TV exceeded 6 million yuan. A new high in entrepreneurship. The company has "East Palace", "Manmenqingluo", "Vermilion Bird", "together with the son", "mysterious Taxi" and other projects are under way, and there are dozens of original script reserves, because the company has the ability to produce high-quality dramas, it is expected to continue to produce boutique works.

2) the company uses the assembly line production mode to output high-quality products stably, which is in line with the industrialization development trend of the film and television industry. Different from the studio production mode adopted by the domestic traditional TV drama companies, the company adopts the assembly line sectional production mode, that is, each link is completed by the most professional people assigned by the company, including producer, director, screenwriter and so on. Under this mode, on the one hand, the company can directly control each link and better control the cost, so as to ensure that the company's project gross profit margin is at a high level in the industry; on the other hand, the company can ensure that each link is highly specialized, thus improving the overall quality of the work; and the assembly line model is conducive to large-scale, sustained and stable output of high-quality products, in line with the development trend of industrialization of the film and television industry, and fully release the company's production capacity.

3) the top professional team continues to flow in to ensure the output of high-quality projects. According to the company announcement and its website, at the beginning of the company's listing in 2015, the company has established stable and long-term cooperative relations with well-known screenwriters Sheng Heyu, Qi Xing, Liu Hua, well-known directors Huo Jianqi, Gao Yijun, Teng Wenji, and well-known actors Fan Bingbing, Zhao Wei, Zhang Fengyi, Weizi and other entertainers by hiring, investing and setting up joint ventures. In 2016, the company established a long-term cooperative relationship with well-known screenwriter Wang Mingjuan, well-known film editor and director Xu Hongyu, senior column director Sun Ying, senior film distributor Zhao Jun and other industry professionals by means of increasing capital and setting up joint ventures. In 2017, the company once again established a long-term cooperative relationship with many professionals or professional teams in the industry, such as famous actor Wang Zhifei and his team, famous producer Jia Xiaohu, senior column director du Yan, and so on. By bringing together all kinds of top teams, the company can ensure the high professionalism of every link in its assembly line production, so as to ensure the quality of the works and continuously output high-quality works.

Investment suggestion: with the recognition of income from important projects such as Baqing Biography, the company's main business performance increased significantly in 2017; the company has strong production and distribution capacity of boutique content, and has a rich project reserve, and is expected to continue to launch popular styles; under the assembly line production mode, the company continues to introduce professional teams to ensure a high degree of specialization in all aspects, which is expected to fully release production capacity while ensuring the quality of works and increase the output of boutique dramas. We estimate that the company's net profit in 2017 and 2018 is 231 million yuan (370 million yuan excluding the influence of the "The Voice of China" project) and 480 million yuan, respectively, corresponding to earnings per share of 0.58 yuan (excluding the impact of the "The Voice of China" project is 0.93 yuan) and 1.20 yuan, respectively. The closing price of the company on January 15, 2018 corresponds to the 2018 net profit, which is only 14.6 times PE. Consider the IPO is only 16 times PE, maintain the buy-A rating.

Risk hint: the risk that the rising production cost of film and television projects leads to a decline in profitability, the tightening of policy supervision leads to the risk that the release progress of film and television projects is lower than expected, and the broadcast effect of "win the World" is lower than expected.