Main points of investment
Event: company announcement:
1) terminate the non-public offering of A-shares and withdraw the relevant application documents.
2) the motion on applying for credit and related party transactions from banks has been examined and approved, and the bank credit line to be applied for by the company in 2018 will not exceed RMB 1 billion yuan. It is proposed to apply for a working capital loan with a total principal of 50 million yuan from the branch of Industrial Bank Co., Ltd. Beijing Economic and technological Development Zone with a term of one year.
3) the motion on the guarantee and related transactions of the company and its related parties to the holding subsidiary has been examined and passed, and the company and / or the company's related parties shall provide guarantee for the bank credit to be applied for by the company's holding subsidiary in 2018, the amount of credit applied for shall not exceed 300 million yuan.
Comments:
We believe that Tangde Film and Television terminated the non-public offering of A-shares and withdrew the relevant application documents, mainly because the situation of the proposed investment project to raise funds has changed greatly and some of the filming has been completed, so it is necessary to replace the investment project to terminate and withdraw the relevant documents. On January 15, 2016, it has been two years since the first interim shareholders' meeting of Tangde Film and Television considered and approved the plan for the non-public offering of A-shares and related matters. During this period, after revision, it was finally decided on December 19, 2016 to reduce the number of non-publicly issued shares to no more than 61.335 million shares and the amount of capital raised not to exceed 817.8 million yuan. We found that the company launched the fixed increase in 2016 for the purpose of project investment, but due to the needs of the shooting process of the company's film and television project, some film and television projects such as "East Palace" and "Flowers and afar" have been filmed or broadcast, so we believe that the termination of the fixed increase of Tangde is mainly due to changes in the investment project, and the company has also indicated that it will resubmit the relevant application documents for refinancing as soon as possible.
"Ba Qing Zhuan" (formerly known as win the World) sold more than expected to enhance the company's cash liquidity, and the company is already applying to issue corporate bonds of no more than 600 million yuan. We believe that the delay in this increase is not expected to put financial pressure on the company's future development. The first round price of the phenomenal film and television content "Ba Qing Zhuan" produced and distributed by Tangde Film and Television is 7.5 million yuan for video platform (Youku Tudou) and 465 million yuan for satellite TV (Jiangsu + Oriental). The play has been issued by the State Administration of Radio, Film and Television in the fourth quarter of 2017 and included in the company's 2017 performance, so we believe that the sale of phenomenal film and television content in 2017 has brought a large amount of capital return to the company. At the same time, Tangde has announced in June 2017 that it has applied for the issuance of corporate bonds of no more than 600 million yuan to meet the funding needs of long-term development, so we believe that even if the data are withdrawn at a later time, the company will not have a large gap in funds on hand, so the normal operation of the company can be guaranteed, and it is expected to normally promote the start-up shooting of follow-up film and television projects.
The company's 2017 performance achieved year-on-year growth, the fourth quarter confirmed the head drama "Ba Qing Zhuan" (the original name wins the world) to dispel the market doubts. The achievements of Tangde Film and Television in 2017 mainly come from many TV dramas, such as "Legend of Ba Qing", "the full moon in bloom that year", "long time no see", "Dear, long time no see", "Emergency Department Doctor", "Flowers and far away" and so on. In the fourth quarter, the performance was mainly confirmed by the phenomenal head drama Ba Qing Zhuan, and the company's phenomenal high-quality content creation ability was once again verified and recognized by the industry, while dispelling the secondary market's doubts about the drama's 2017 performance.
The adverse impact of Talpa on Tangde Film and Television's suspension of authorizing the "The Voice of China" project has been fully taken into account. If the impact of impairment factors is excluded, Tangde's performance in 2017 is expected to achieve more than 90% growth. In November 2017, the company received Talpa Media B.V. Sent about asking for the termination of the "The Voice of China"
The copyright authorization letter exposes the company to the risk that it may not be able to obtain compensation for losses, including, but not limited to, the $18.75 million license fee and related taxes paid. The "The Voice of China" project has brought about 140 million yuan in impairment to the company. Therefore, if the impairment factor is excluded, Tangde Film and Television made a net profit of 3.4-390 million yuan in 2017, an increase of 89.9% 117.9% compared with 179 million yuan in 2016. We believe that the impairment impact of "The Voice of China" has been fully taken into account and is an one-off event and will not have a continuous adverse impact on the company's operations in 2018.
Tangde Film and Television's main business profits doubled in 2017, and film and television projects achieved a double improvement in quality and performance. Based on excluding the impairment effect of The Voice of China, if we further exclude the analysis of non-recurring profit and loss, the net profit of Tangde Film and Television's main business in 2017 was 329-379 million yuan, an increase of 99.4% 129.7% compared with 165 million yuan in 2016.
In 2018, Tangde Film and Television is expected to enjoy both volume and price dividends of film and television projects! Film and television companies that can continuously produce high-quality content have more investment value. We believe that due to the increased demand for content from video websites and satellite TV channels, the price of film and television has risen to a high level, and the company has the strength of phenomenal content creation and distribution, and has the advantage of premium. At present, the annual output of Tangde's film and television content is on the rise, and nine films and television works are expected to achieve revenue in 2018. The company's existing projects are "East Palace", "Mangqinglou", "We are Young in wartime", "Feng Zicai", "A Love of Ayana", "March 30 of the decade", "people in the Beibu Gulf", "the Legend of Ba Qing" and "the full moon in bloom that year" two rounds and later stages, etc. The company is expected to launch 1-3 new film and television projects in 2018, so we think that Tangde Film and Television is expected to enjoy an increase in the volume and price of high-quality content in 2018.
Chairman Wu Zongzeng shows his confidence in the future development of Tangde Film and Television. We believe that the company is in a value depression at present. Since November 2017, the share price of Tangde Film and Television has fallen sharply under the influence of the "The Voice of China" incident. Mr. Wu Hongliang, the chairman of the company, has increased his shares in the secondary market for many times from December 14 to December 26. We believe that the competitiveness of the company's sustainable development in the future is still being consolidated and strengthened, and it is in a depression of value after being affected by the Black Swan incident.
The company's film and television talents gather, reserve film and television drama projects are rich, the future development of the time, land and people. As a comprehensive film and television group, Tangde Film and Television has a win-win cooperation with talents in the industry with an open mind. its producers, directors, writers, artists and other talents gather, and there is no lack of domestic first-tier creators and stars. Such as Gao Yijun, Ding Hei, Xu Hongyu, Wei Zi, Juanzi, Fan Bingbing, Zhao Wei and so on, form the soft power of Tangde Film and Television in the market competition in the future. In addition, the company has a rich reserve of film and television projects, laying the foundation for the long-term growth of the company in the future.
The development prospect of Tangde film and television is good. We believe that the fundamentals and performance of Tangde film and television are on the rise, and at the same time, it has an advanced strategic layout, and the content production side has set foot in three major areas, and each field has a reserve of phenomenon-level projects (fine drama, film, variety program). At the same time, Tangde is actively stuck in the offline channel layout (cinema line), which is currently in the early stage and is expected to become a new growth point of the company's business and performance in the future.
Profit forecast and investment advice:
Profit forecast: we expect the company's profit forecast for 2017 and 2018, and the net profit of Tangde Film and Television from 2017 to 2018 is expected to be 2.19 and 501 million yuan respectively belonging to the parent company. According to the estimated total share capital of 400 million shares, we estimate that the EPS of the company from 2017 to 2018 is 0.55 yuan and 1.25 yuan respectively.
Investment suggestion: we believe that Tangde Film and Television will perform well in the future in the production and distribution of phenomenal high-quality content (TV dramas, movies, variety shows), channel resource layout, artist brokerage business upgrading, Internet new media exploration, overseas strategic layout, pan-entertainment platform construction and other fields. with the help of the capital market, the company is expected to become the dark horse of the media sector and buy ratings.
Risk hints: the broadcast effect of works such as "win the World" is not as good as expected; A stock market sentiment and financial impact; regulatory policy risk; the risk of profitability decline caused by rising production costs of film and television content.
