Main points of investment
Event: on April 19, Jixiang released its annual report for 2017, and the company achieved revenue of 21. 5% in 2017.
9.9 billion yuan, an increase of 60.1% over the same period last year, and a net profit of 220 million yuan, an increase of 647.76% over the same period last year.
Among them, the film and television business income is 388 million yuan, and the subsidiary Jixiang Film Studio achieves a net profit of 154 million yuan.
The profit growth rate is in line with expectations, and the cultural and entertainment transformation is beginning to show results. The growth rate of the company's performance is in line with expectations, and the growth mainly comes from the profit contribution of the company's film and television business and the company's confirmation of 99.907 million yuan in government subsidies. In 2016, the company acquired a subsidiary, Jixiang Film Studio, and began to transform the entertainment industry. in 2017, two films "three generations of Peach Blossom" and "Sewing Machine Band" were produced, and four TV dramas confirmed their income. They are "ordinary years", "National Life", "the Frontier of Love" and "fighting Kunlun". The film and television business income is 388 million yuan, and the gross profit margin is 45.73%. The net profit of Jixiang Film Studio, a subsidiary of the film and television business, is 154 million yuan. We believe that the transformation of the company since 2016 has begun to bear fruit. In 2017, we participated in the investment and production of a number of film and television productions, and established a good cooperative relationship with partners in the industry.
In 2018, film and television projects are rich in reserves, with "positive energy" and "theme" as the main themes.
1) in terms of films, the company adheres to the project matrix of rejuvenation, industrialization and globalization. the projects expected to be released in 2018 are "Animal World" and "Asura". The reserve projects also include "Weather explosion", "dare to ask where the way is", "Weather Diary" and so on. The Hollywood film Battleship Greyhound, which is also involved in the investment, has been launched.
2) in terms of TV series, the company adheres to the combination of "independent development and IP optimization" to create high-quality content, focusing on realism, chronology and other themes. At present, the items in reserve mainly include "Old Chinese Medicine", "Brave Heart 2", "Niangdao", "returning to come", "so you are still here", "Princess of Daming" and so on.
With the deepening of the cultural and entertainment transformation, we expect profitability to be further improved. In 2018, some of the company's reserve TV dramas entered the income confirmation period, including "Old Chinese Medicine", "Brave Heart 2", "return to return" and other projects. We believe that the company's film and television business will maintain rapid development in 2018. Profitability is expected to further improve, while from the company's annual report disclosed reserve items, relatively rich, future performance can be expected.
Investment suggestion: according to the company's current film and television content reserve, it is expected to make a breakthrough in the entertainment sector in the future and become an important business outside the company's molybdenum industry. We expect the company's operating income from 2018 to 2019 to be 2.305 billion yuan and 2.486 billion yuan respectively, an increase of 4.84% and 7.85% respectively over the same period last year. The net profit belonging to the parent company is 501 million and 569 million respectively, an increase of 128.30% and 13.43% over the same period last year. The company's current stock price is 19 times the 2018 earnings forecast and continues to be rated as "overweight".
Risk hints: 1) Management risk: most of the company's senior executives are in the entertainment industry, and they are not familiar with the traditional business, and the traditional molybdenum industry has the risk of continuing to decline; 2) Film and television business risk: project launch is not as expected risk, policy regulatory risk.
