Yuan, up 87.95% year on year; realized net profit of 360 million yuan, up 1684.56% year on year; net profit after deducting non-return net profit of 323 million yuan, up 759.93% year on year.

The growth rate of the creative business was strong, and various business sectors rebounded as the general market picked up.

In the first half of 2023, the company's distribution/creation/screening/technology/service business achieved 12.78/6.59/ 5.36/ 2.54/996 million yuan, respectively, an increase of 105.74%/218.23%/48.15%/8.58%/18.72% over the previous year. Looking at the gross margin of the company's various businesses, the gross margin of the distribution/creation/screening/technology/service sectors was 32.60%/20.35%/15.22%/37.79%/37.68%, respectively. The company focuses on its main business. 1) Distribution business: In the first half of 2023, 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 box office of domestic films during the same period; distributed 62 imported films, with a cumulative box office of 3,959 billion yuan, accounting for 71.45% of the total box office of imported films during the same period; 2) Creative business: In the first half of 2023, the company led or participated in the production and marketing of 20 movies, which achieved a total box office of 14.671 billion yuan, accounting for the box office of domestic movies in the same period 73.56% of the total. Subsequent reserve projects are rich. The company is currently creating and developing nearly 60 projects, including more than 40 original projects.

Various projects are being developed, filmed, or post-production, including “Volunteer Force: Attack of the Soldiers” (National Day schedule), “Legend of Condor: King”, “Just Blue and Green”, and “Never Disturb 3”; 3) Screening business: The company continues to strengthen cinema management, and the holding cinema has shut down 5 cinemas in accordance with optimized management arrangements. In the first half of 2023, the number of movie viewers at the company's operating and holding theaters was 11.83 million, with an average single screen output of 480,000 yuan, leading the industry; 4) Technology business: In the first half of 2023, 131 CINITY cinemas were opened in China, and 11 theaters were installed and ready to open. The CINITY system signed 6 new contracts in Europe, for a total of 10 units.

During this period, China Film Barco sold 494 new projectors; 5) Service sector: In the first half of 2023, the China Film Base provided production services for a total of 223 film and television productions.

The film market continues to pick up, and many of the company's films have performed well.

In the first half of 2023, the country's total box office was 26.271 billion yuan, an increase of 52.91% over the previous year. The company's video box office and revenue resonated with the same frequency. Many of the company's films performed well. As of June 30, “Wandering Earth 2,” which was mainly produced by the company, had grossed 4,029 billion yuan, and “Life Is Unfamiliar” (1,184 million yuan) won the 51st box office title. On the cost side, in the first half of 2023, the company's various expense rates were further optimized year on year, and the sales expense rate/management expense rate/financial expense ratio decreased by 1.7/5.8/0.7 pct year on year. The company's reserve projects were rich in the second half of the year. “Former Age 4: Early Marriage in the British Year” and “Volunteer Soldier Attack”, which the company participated in the production and distribution, will be screened on the National Day. As of August 28, the number of people who wanted to watch Cat's Eye was 111/114 million. In terms of distribution, the company will expand cooperation in the distribution of imported films, participate in the distribution of small to medium cost films, and continue to enrich the film market supply. In the technology sector, the company will further deepen the promotion and application of high-tech format films.

Investment suggestions: The company is expected to benefit from the rise in industry sentiment. Considering the speed of market restoration, we raised the company's 2023E-2025E annual revenue to 66.16/ 80.04/9.713 billion yuan (previous value was 60.22/ 75.39/ 8.438 billion yuan), an increase of 126.6% /20.97%/21.36% over the previous year. Net profit for 2023E-2025E was 99/12.13/ 1,405 million yuan (previous value was 917/ 11.22/ 1,256 million yuan). Net profit to return to profit in '23 is expected to turn a loss into a profit, net profit for 24/25 increased 21.39%/15.9% year-on-year, and 2023E-2025E PE was 27.42/22.59/ 19.49 times, respectively.

Risk warning: The recovery of the film market fell short of expectations; the normalization and introduction of imported films fell short of expectations; the box office of movie content released fell short of expectations; policy regulation risks.