The performance is steady and repaired, and the ability of production and distribution is outstanding.

The company announced its performance forecast for the first half of 2023, which is expected to realize a net profit of 280 million yuan to 380 million yuan, compared with 20 million yuan in the same period last year; deducting the net profit of 260 million yuan to 360 million yuan in the same period last year, and a loss of 49 million yuan in the same period last year. Among them, 2023Q2 is expected to achieve a single-quarter net profit of 98 million yuan-198 million yuan, compared with a loss of 96 million yuan in the same period last year, the performance is in line with expectations. In the first half of 2023, according to the business: 1) in the creative sector, the company led or participated in the production and put on the market a total of 20 films, with a cumulative box office of 14.671 billion yuan (8.059 billion yuan in the same period). Of the five films that grossed more than 1 billion yuan, 4 were produced by the company. 2) in the distribution section, the company led or participated in the distribution of 234 domestic films, with a cumulative box office of 16.307 billion yuan, accounting for 89.31% of the total domestic box office in the same period, an increase of 19.1 pct over the same period; a total of 62 imported films were distributed, with a cumulative box office of 3.959 billion yuan, accounting for 71.45% of the total box office of imported films in the same period. 3) projection section, by the end of June, the company has a total of 131business holding cinemas and 985 screens, a net decrease of 5; 4) in the technology sector, 131domestic CINITY cinemas have been opened and 11 have been installed.

The electric box office in the first half of 2023 returned to 84% of that in the same period in 2019, and the summer season is expected to continue the strong recovery trend.

According to Maoyan Professional Edition, the total box office of the film in the first half of 2023 was 26.3 billion yuan, returning to 84% of that in the same period in 2019, and the film industry recovered in the first half of the year. The mid-afternoon film in 2023 grossed 909 million yuan, making it the second highest-grossing film in film history, surpassing the same period in 2019. The box office champion, "the Vanishing her," grossed 507 million yuan. As of July 14, the film's box office has reached 3.28 billion yuan, ranking 14th in mainland film history.

We believe that the box office during the first half of the year and the Dragon Boat Festival exceeded expectations. At this time, it is the summer season (June-August 31). On 2019-21-22, there were 96 films released in the summer season, with a box office of 177.8 million yuan. As of July 13, there have been 114 films scheduled for this summer season, and the box office has reached 7.7 billion yuan. It is expected that there will be high-quality content. At present, other high-quality films that have been booked include "Octagonal Cage", "Chang'an 30,000 li" and "Tea er Zhong"

"Fengshen I", "Super Family", "Giant Tooth Shark 2", "Mission impossible 7" and so on, among them, the continuous supply of high-quality content, the summer box office is expected to exceed expectations.

The company actively participates in the important schedule and pays attention to the performance flexibility in the second half of the year.

The recovery of the domestic film market is good for the relevant industry chain companies. Chinese film is the leading film production and distribution company in China, and has a scarce import film distribution license, which also benefits from the resumption of the introduction of imported films. The company participated in the summer production of films such as "Super Family", "Giant Tooth Shark 2" and "Hot". The imported blockbuster "Mission impossible 7" was released on July 14. "volunteers: male soldiers", a film controlled by the company, has been scheduled for National Day.

Investment advice:

We estimate that the company's net profit from 2023 to 2025 will be 9.1 pound 12.0 billion yuan, corresponding to EPS 0.49 pound 0.64 billion yuan, and corresponding PE to 31 pound 24max 22X. Give the company a valuation of 35X in 2023, corresponding to the target price of 17.2 yuan, and maintain the "over-A" rating.

Risk hint: content regulation changes, content production progress is not as expected, film release performance is not as expected.