Key points of investment:
The net profit returned to the mother in 2019 turned a loss into a profit. In 2019, the company achieved total revenue of 1,171 million yuan, a year-on-year decrease of 18.37%; net profit of Guimu was 165 million yuan, an increase of 115.05% over the previous year; after deducting net profit of 161 million yuan, an increase of 114.67% over the previous year; and introduced a new controlling shareholder, Huazhang Investment, a wholly-owned subsidiary of Jiangxi Publishing Group Corporation, to become a state-owned mixed ownership film and television company. In the first quarter of 2020, the company's total revenue was 1,4193 million yuan, a year-on-year decrease of 99.08%; Guimu's net profit was 153834 million yuan, a year-on-year decrease of 346.15%, mainly due to the impact of the epidemic and the small amount of confirmed revenue.
Adjust and optimize the product structure, and develop multiple content derivatives. In 2019, the company's film and television business revenue was 1,131 billion yuan, a year-on-year decrease of 9.91%, accounting for 96.57% of revenue, making it the company's largest main business; gross profit margin was 22.75%, up 21.05pct from 2018; TV dramas “Storm Dance”, “Age of Glory”, “Under the Golden Coat” and “The Boy in the Wind” confirmed first-round distribution revenue. The company's game business revenue was 334.43 million yuan, down 81.14% from the previous year; the gross profit margin was 52.18%, a decrease of 16.7 pct from 2018; the subsidiary is in favor of technology obtaining the channel operation license of China Mobile Migu Culture on the basis of game development and agent operation, gradually developing the operation business of various product lines such as games, video, and reading, while actively laying out the short video business. The company's artist agency service business revenue was 6.7073 million yuan, an increase of 245.8% over the previous year. It has established a young artist hierarchy, cultivating not only well-known actors such as Guo Jiahao, Miao Chi, and Guo Pinchao, but also injected fresh blood from Dong Yanlei, Chen Youwei, and Zhao Qian.
Netizen who are deeply involved in the payment model content, and the 2020 project reserves are rich. In 2020, the company expects to complete production, obtain distribution licenses or launch 10 TV series projects. Judging from the content, they mainly focus on modern themes; 8 web dramas and 5 online movies are expected to be launched or launched. Considering the filming cycle of movies and TV dramas, we anticipate that the company plans to launch before the 3rd quarter will be more likely to confirm revenue in 2020, providing a greater guarantee of the company's main business performance. At the same time, the company will actively develop various businesses such as artist brokerage, variety shows, games, and traffic operations, accelerate the company's transformation and upgrading, and upgrade from a film and television content provider to a “high-quality operator in the pan-entertainment industry.”
We believe that the company's “good risk control of state-owned holdings+light financial level+return to the main movie and television drama business” in 2020 is firmly optimistic about the company's performance in 2020. We expect the company's revenue in 2020-2022 to be 1,812 million yuan, 2,367 million yuan and 2,852 million yuan respectively, with year-on-year growth rates of 54.7%, 30.6% and 20.5% respectively; corresponding net profit of 199 million yuan, 231 million yuan and 276 million yuan respectively, with year-on-year growth rates of 20.9%, 16.2% and 19.2% respectively; corresponding to fully diluted EPS of 0.42 yuan, 0.49 yuan and 0.58 yuan respectively. Referring to the average PE valuation of comparable companies in 2020, Ciwen Media was given 25-30 times its PE valuation in 2020, corresponding to the reasonable value range of 10.5 yuan/share - 12.6 yuan/share, maintaining a superior market rating.
Risk warning: Affected by the epidemic, the progress of film and television projects fell short of expectations, and there is a risk that the game business will continue to decline.
