occurrences
On August 28, 2023, the company announced the results for the first half of 2023.
Key points of investment
Interim report performance was in line with expectations; 2023Q2 net profit surged 52% year on year. According to the company's 2023 annual report, 2023H1 achieved revenue of 1.13 billion yuan, up 1.3% year on year; achieved net profit of 120 million yuan, a year-on-year decrease of 10.4%; achieved net profit of 110 million yuan without return, a year-on-year decrease of 13%. Let's take a look at the split:
In 2023, Q2 achieved revenue of 800 million yuan, a year-on-year increase of 22%, and a year-on-year increase of 140%; in 2023, Q2 achieved net profit of 100 million yuan, a year-on-year increase of 52%, and a year-on-year increase of 371%. The company's net interest rate increased significantly in 2023Q2: the company's net sales interest rate in 2023Q2 was 12.9%, up 3.3 pcts year on year, and 6.8 pcts month on month.
It was selected for the first batch of 12 technological innovation construction projects by the Ministry of Culture and Tourism; the Asian Games are close to many businesses and are expected to benefit. On August 28, 2023, the Ministry of Culture and Tourism issued the “Notice of the Ministry of Culture and Tourism on Announcing the Construction List of the First Batch of Technology Innovation Centers of the Ministry of Culture and Tourism”, which clearly initiated the construction of the 12 first batch of technology innovation centers of the Ministry of Culture and Tourism. Dafeng's “Intelligent Stage System Integrated Technology Innovation Center of the Ministry of Culture and Tourism” project ranked among them.
The countdown to the Asian Games has begun. As the official supplier of the Hangzhou Asian Games, Dafeng Industrial provides 36 Asian Games venues with integrated solutions or core equipment such as seat stand systems, competition lighting systems, competition sound reinforcement systems, LED display systems, and integrated game equipment management systems. The company's various businesses, such as cultural tourism and performing arts, venue management, and cultural and sports equipment, are expected to benefit.
The company recently won the bid for 134 million yuan for the Fangxian Xiguan Impression Phase II (Fangxian Shijing City, China) Shijing Grand Theatre Stage Craft, Central Lake Surface Dynamic Sculpture and Fountain Projection System Project (EPC). In addition to 3.26 billion rubles (tax included), equivalent to approximately RMB 278 million for the Sochi Sirius Theatre and Concert Hall complex project contract, the company's business model ranged from core equipment for cultural and sports tourism to a combination of core equipment for cultural and sports tourism with digital, art, and immersive performances.
Core logic: Downstream sentiment rebounds +service revenue share increases, performance valuations have broad scope to improve downstream sentiment: Under the goal of steady growth, the National Standing Committee will focus on expanding domestic demand and effective investment, and include the upgrading and transformation of consumer equipment in the scope of refinancing and fiscal discount support. It is expected that financial support for infrastructure, manufacturing and other sectors will be strong. We expect to benefit from the recovery in consumption and policy support. Construction and tenders for cultural and sports hotels in China, such as cultural centers, grand theaters, sports centers, and theme parks, are expected to pick up and accelerate in 2023, and the company's downstream cultural tourism and sports industry will pick up sharply.
Transformation and operation opens up space for growth: The company is driven by two-wheel drive through cultural and sports tourism equipment+cultural and sports tourism empowerment services, gradually expanding to cultural and sports tourism empowerment, and the share of service revenue continues to increase. The company's new business focuses on content planning and operation services such as cultural and sports venues, scenic spots, and global tourism. Among them, in terms of venue operations, it has more than 20 major theaters and cultural and sports stadiums across the country, and has become one of the largest cultural venue operators with direct management area in the country. In terms of cultural tourism integration, it has entered the cultural and performing arts industry through projects such as “Tonight Together with Xixi”. In terms of event management, it took the lead in obtaining the right to operate the Hangzhou Marathon from 2022 to 2024, etc.
Profit forecasting and valuation
The company's revenue for 2023-2025 is expected to be 35.3, 43.1 billion yuan, and 5.30 billion yuan, up 24%, 22%, and 23% year on year; return net profit is 4.3, 6.0, and 780 million yuan, up 50%, 39%, and 30% year on year, corresponding PE to 14, 10, and 8 times. The company's traditional business structure will be upgraded, and cultural, creative and operational businesses will increase service revenue and increase profit margins. The company's performance is expected to accelerate in 2023-2025 and maintain a “buy” rating.
Risk warning: New construction of cultural and sports venues falls short of expectations; development of cultural tourism service business falls short of expectations