Core ideas:

Hengdian Film and Television disclosed its results in the three quarters of 2023: 23Q1-Q3 achieved 1.953 billion yuan in revenue, an increase of 59.37% over the same period last year; its net profit was 236 million yuan, and its non-net profit was 172 million yuan, turning a loss into a profit. 23Q3 achieved a revenue of 781 million yuan, an increase of 99.00% over the same period last year; the net profit was 123 million yuan, and the non-net profit was 98 million yuan.

Continue to expand cinemas, reduce costs and increase efficiency, and maintain the second market share in the country. By the end of the 23Q3 period, the company had opened 429 cinemas / screen 2735, 23Q1-Q3 's box office market share was 3.64%, and joined 83 cinemas / screen 468, 23Q1-Q3 's box office market share was 0.57%. Relying on Hengdian Group, the company continues to expand the scale of cinemas and ranks second in the industry in market share, and implements the survival of the fittest to further improve the operational efficiency and comprehensive competitiveness of cinemas. 23Q1-Q3, the company opened 18 new directly operated cinemas / screen 116, closed 4 cinemas / screen 22.

23Q3, the company's direct cinema achieved box office revenue of 638 million yuan, an increase of 117% over the same period last year, with a market share of 3.62%, an increase in 0.14pp compared with the previous month and a decrease in 0.18pp compared with the same period last year.

Actively participate in content investment. 23Q3 participated in the release of films such as "Anti-Drug 3: the end of the World", "the Super Family", "warm", "missing each other", "burning Winter", "this trip is worth it", "volunteers: male soldiers" and "ex 4". 23Q4 participated in the release of films such as "Save the suspect", "Wade through the Sea of anger" and "defiant 2".

Profit forecast and investment advice. We estimate that from 2023 to 2025, the operating income of the company will be 2.486 billion yuan, and the net profit will be 2.41 million yuan. The 23-year National Day box office fell short of expectations, so we lowered the company's profit forecast. However, taking into account the content approval remains loose, Hengdian cinema accelerated expansion, cost reduction and efficiency, in the industry recovery cycle is expected to achieve excess revenue. With reference to similar listed companies, we give the company a valuation of 35 times PE in 2024, corresponding to a reasonable value of 20.51 yuan per share, maintaining a "buy" rating.

Risk tips: box office growth is not as expected; industry regulatory risks; uncertainty of revenue from film and television projects; increased competition in the industry; weak consumption of domestic residents.