Event: the company released its 2017 annual report, with operating income of 2.58 billion yuan, an increase of 49.09% over the same period last year, and a net profit of 66.7363 million yuan, an increase of 102.04% over the same period last year. Diluted earnings per share was 0.25 yuan. A cash dividend of 0.5 yuan (including tax) shall be distributed to all shareholders for every 10 shares.
The digital transformation of integrated marketing business has been initially completed. The company's digital marketing business developed rapidly, with revenue of 1.032 billion yuan, an increase of 442% over the same period last year, and endogenous digital marketing business also performed well, with an increase of 212.46% over the same period last year. In September 2017, the company bought a 60% stake in Shanghai Zhiqu with 288 million yuan in cash and cut into the field of mobile marketing. Shanghai Zhiqu deducted 43.33 million of its non-net profit in 2017, with a completion rate of 108%. In March this year, the company announced that it plans to buy the remaining 40 per cent of Shanghai Zhiqu with cash, with performance commitments of no less than 48 million yuan, 57.6 million yuan and 69.12 million yuan respectively from 2018 to 2020. In addition, benefiting from the pick-up of TV media in 2017, the company's traditional media agency business achieved revenue of 1.26 billion yuan during the reporting period, an increase of 1.61% over the same period last year. The company continues to strengthen the research and development of big data and AI scene applications, and has been actively exploring the scene landing of blockchain in the media industry.
Plus content production, content marketing can be expected in the future. During the reporting period, the company continued to cultivate the content marketing business with variety shows as the carrier, and invested in the production of the cultural program "Shangba Poems", which was well received by People's Daily and many other media. In March 2017, the company announced that it planned to raise 1.151 billion yuan in a non-public offering, of which 696 million would be used to invest in seven TV variety shows and two network variety shows. If the transaction goes smoothly, it will further improve the company's layout in the content industry chain. In July 2017, the company bought a 100% stake in Zhuhai Vision, a content marketing company specializing in Internet video, for 385 million in cash, deducting 65.45 million of its non-net profit in 2017, with a completion rate of 187%. In 2018, the company will work with the industry's well-known MCN institutions to develop short video R & D, production and marketing, and develop micro-variety and light variety show models.
Profit forecast: with the continuous recovery of the advertising industry, the proportion of mobile marketing in online advertising continues to grow, and the growth rate of the content marketing industry accelerates. Assuming that the company's business continues to progress steadily, the EPS in 18-20 is expected to be 0.32 yuan, 0.40 yuan and 0.51 yuan respectively, maintaining the "overweight" rating.
Risk hint: acquisition integration risk, industry competition aggravates the risk.
