Huawei Culture released its 2017 mid-year report: the company achieved operating income of 387 million yuan, an increase of 8.85% over the same period last year, and operating profit of 159 million yuan, an increase of 68.37% over the same period last year. Net profit belonging to shareholders of listed companies was 153 million yuan, up 71.84% over the same period last year; corresponding to earnings per share of 0.18 yuan. The company expects net profit from January to September 2017 to grow by 35% Murray 85%.
The China News met expectations, and the film and TV drama business grew rapidly: the company's film and TV drama business maintained rapid growth. TV dramas that mainly contributed to revenue and profits included the first season of "that Starry Sky, the Sea of the Sea" and the confirmation of TV station sales revenue in the second quarter. In the second half of the year, the second season will be broadcast on the network. In the first half of 2017, the company's TV series business achieved revenue of 323 million yuan, an increase of 35.64% over the same period last year. In addition, the company has carried out film and performing arts brokerage business on the basis of ploughing high-quality film and television dramas, gradually realizing the upgrading transformation from a single film and television content company to a comprehensive pan-entertainment company. In terms of game business, the first wave of the company's wholly-owned subsidiary, Fengyun Interactive, on the basis of operating the original games, developed games such as "Sacred Land War", "Mangjing H5" and "H5, the close master of school girls". And plans to launch operation in the second half of this year.
The decrease in the expense rate during the period led to a substantial increase in net profit: the expense rate during the company period decreased by 4.1 percentage points to 10.8%, of which financial expenses rose by 30.36% due to exchange rate fluctuations; sales expenses due to the reduction of subsidiary film and television advertising expenses and the current reduction of toy business, decreased by 58.20% compared with the same period last year; management expenses decreased by 33.81% due to the reduction of toy business.
Profit forecast: the company has excellent ability to create, produce and distribute high-quality TV dramas. Neverland Star Park, a wholly-owned subsidiary, has created many IP boutique plays, and the first wave of the wholly-owned subsidiary has strong game research and transportation capabilities, and the game quality has been recognized by the market. We estimate that the company's operating income from 2017 to 2019 will reach 9.30,10.56 and 1.193 billion yuan respectively, and the net profit will be 3.90,4.19,451 million yuan respectively, and the corresponding EPS will be 0.45,0.49 and 0.52 yuan respectively. Based on the closing price of 9.08yuan on August 23, 2017, the dynamic PE for 2017-2019 will be 20.0X, 18.6X and 17.3X respectively, covering for the first time and giving "recommended" investment rating.
Risk hints: (1) market competition aggravates risks; (2) rising costs; (3) business integration and goodwill impairment risk.