Incident Overview
On the evening of August 29, 2023, Jebsen Co., Ltd. disclosed its semi-annual report. The company achieved operating income of 1,488 billion yuan in the first half of 2023, down 13.47% from the same period last year; net profit attributable to shareholders of listed companies was 352 million yuan, down 12.70% from the same period last year.
Business performance in the second quarter was impressive. Since 2023, equity incentives and amortization expenses have declined, the company has further focused on copyright business and continued to shrink audio and video technology and film and television content production business. Since the second quarter, the company's film and television copyright operation business has benefited from a strong recovery in cinema line consumption. In Q2, the company achieved revenue of 818 million yuan, up 11.79% year on year and 22.14% month on month; achieved net profit of 194 million yuan, up 70.79% year on year, 23.15% month on month, net interest rate as high as 23.72%, and profit quality continued to improve. As the movie's summer box office reached a record high this year, the company's business recovery trend continued to improve in the second half of the year.
In terms of gross margin, in the first half of 2023, the gross margin of the film and television copyright business was 37.32%, down 2.45 pct from the same period last year, but significantly higher than previous years. The continued increase in film library performance contributions will further increase the company's profit level, which is expected to drive the company's overall gross profit margin and net interest rate to continue to rise. In terms of cost rate, the sales expense ratio was 2.92%, up 0.21 pct from the same period last year, and the management fee rate was 7.31%, down 2.17 pct from the same period last year. The large decline was mainly due to the reduction in equity incentive amortization expenses this year. The R&D expense rate was 0.87%, up 0.57 pct over the same period last year, and the financial expense ratio was 2.10%, down 0.44 pct from the same period last year.
Exploring AIGC's new business format and in-depth cooperation with Huawei Pangu
On the basis of the steady development of the main copyright business, the company has further implemented the technology development and application of AI in the field of related content production technology, combined with the company's layout of the intelligent media asset management system, increased technology development and application efforts in the AIGC field, promoted the in-depth application of AIGC related technology in content creativity, film and television content production, short video creation, etc., thereby improving the efficiency of the company's film and television drama filming and secondary creation of related film and television content, and enhancing the multi-channel and multi-modal operation value of the company's copyright. According to the company's interactive disclosure, on July 8, 2023, the company and Huawei Pangu formally signed a cooperation agreement in Dongguan, Guangdong, and became Pangu Grand Model Ecological Partner. The two sides will develop in-depth cooperation in the AIGC field.
Multiple industry policies are favorable. Since the second half of 2021, the second innovation of short video has boosted the revaluation of copyright value, policy documents such as the “Outline of a Strong Intellectual Property Country”, “14th Five-Year Plan for the Film Industry”, “Short Video Content Review Rules”, “14th Five-Year Plan”, “14th Five-Year Plan”, and “14th Five-Year Plan” Chinese TV Drama Development Plan” have significantly benefited the long-term development of the company's film and television copyright operation business. In recent years, demand for long video content from short video platforms and live streaming platforms such as Douyin, Kuaishou, Station B, and Huya has been increasing, further stimulating the vitality of the film and television copyright market. As multiple long and short video platforms join hands to develop second creative cooperation for short videos, the company has significantly benefited from the scarcity of high-quality film and television copyright. We believe that the company's copyright assets are expected to be revalued, and the space for monetization of copyright assets is expected to further increase.
Investment advice: Maintaining a “buy” rating
According to the latest financial results, we adjusted the company's profit forecast: adjusted the 2023-2025 revenue forecast of 44.61/49.71/5.447 billion yuan to 40.64/4296/4.530 billion yuan, adjusted the 2023-2025 net profit forecast of 7.04/8.72/1,036 million yuan to 7.51/88/1,018 million yuan, adjusted the EPS forecast of 0.27/0.33/0.40 billion yuan to 0.29/0.34/0.39 billion yuan Corresponding to the closing price of 5.30 yuan/share on August 29, 2023, PE was 18, 16, and 14 times, respectively. The company currently has high barriers to its film and television copyright business, high industry prosperity, and continues to explore new AIGC business formats. We believe its overall valuation level is low and maintains a “buy” rating
Risk warning
The macro environment has increased uncertainty about the distribution of new films in the film and television industry; progress in the implementation of film and television copyright contracts has fallen short of expectations; and competition for high-quality copyrighted content in the market is likely to increase.