Hengdian Film and Television released its quarterly report for the third quarter of 2023: the company's revenue in the first three quarters of 2023 was 1.95 billion yuan (up 59.37% over the same period last year), the total operating cost was 1.774 billion yuan (25.25% over the same period last year), and sales and management expenses increased by 29.69% and 24.6% over the same period last year. Return to the mother and deduct non-profit 2.36, 172 million yuan (321.58%, 214.29%) In a single quarter, the company's total revenue in the third quarter of 2023 was 781 million yuan (an increase of 99 percent over the same period last year), while its return to its mother and deduction of non-profit was 1.23 yuan and 98 million yuan, all of which turned from losses to profits.

Main points of investment

Repair continued revenue growth of 99% in the third quarter of 2023. Profit turned into profit.

The company's profits turned from losses to profits in the first three quarters of 2023, the results in the first quarter were driven by the Spring Festival, and imported films were not satisfactory in the second quarter. The summer vacation in the third quarter helped the company's main business to continue to repair (the net cash flow of operating activities in the third quarter was 277 million yuan higher than the pre-epidemic level); in the third quarter of 2023, the company opened eight new cinemas with box office receipts of 638 million yuan (market share 3.62%). The company continues to increase investment in content production and distribution efforts to improve the output capacity of single Studios, combined with online and offline double runways, committed to building a leading enterprise in the film and television industry. In October 2023, the company signed a cinema agreement with IMAX to build 20 new IMAX cinemas, highlighting the company's attitude towards the subsequent development of the film market and adding IMAX cinemas based on user experience.

Industry data continue to pick up in the first three quarters of 2023

On the industry side, from the box office side, the national box office in the first three quarters of 2023 (excluding service charges) was 41.427 billion yuan (an increase of 76.9% over the same period last year), the second highest in the past five years, but not more than 44.608 billion in the same period in 2019. In terms of the number of people going to the cinema, the number of people going to the cinema in the first three quarters of 2023 was 1.071 billion (an increase of 75.6% over the same period last year), which was the second highest in the past five years, but not more than 1.285 billion in the same period of 2019. On the whole, the number of people going to the cinema in the first three quarters of 2020 and 2022 was 228,610 million respectively, but the number of people going to the cinema in the same period of 2023 was more than 1 billion, highlighting that the demand market for cinema is still resilient. From the perspective of ticket prices, the average ticket price of the national box office from January to September 2023 is 38.6 yuan (an increase of 0.8% over the same period last year). Box office growth depends on the number of people and ticket prices. The year-on-year growth rates of box office, person-time and ticket prices in the first three quarters of 2023 were 76.9%, 75.6% and 0.8%, respectively. The year-on-year increase in ticket prices benefited from the increase in attendance in the first three quarters of 2023, and the overall increase in ticket prices was relatively moderate.

The box office data of the summer holiday in 2023 surpassed that in the same period in 2019 (pre-epidemic level), boosting the film market. Although the National Day holiday in 2023 did not continue the new high trend of the summer vacation, the overall year-on-year recovery growth trend was relatively good. Cinema is an optional consumer sector to supply and create demand, and the supply of high-quality films is the core. Looking forward to the remaining films in 2023, you can pay attention to films such as "Captain Marvel 2", "priceless Treasure", "Save suspects", "three Brigades", "sneaking", "Goldfinger" and the pending film "peacekeeping and riot teams".

Profit forecast

Maintain a "buy" investment rating. Due to the internal and external factors, the clearance of cinema film industry is accelerated, and the company's market share is steady. Based on the follow-up content, the company provides orderly repair to the main business. In 2023-2025, the company's revenue is 23\ 26.5\ 3 billion yuan, the return profit is 2.93\ 3.62\ 431 million yuan respectively, the EPS is 0.46\ 0.57\ 0.68 yuan respectively, and the current stock price corresponds to 30.0,24.3,20.4 times PE respectively. Investment dimension, short-term viewing of high-quality films, medium-term single screen output inflection point, long-term view of the rise of domestic high-quality content supply and cultural output under cultural and film powers, both supply and demand are expected to continue to help the main industry pick up from 2023 to 2024. at the same time, the box office increment of the subsequent sinking market is expected to maintain the "buy" investment rating.

Risk hint

The risk of slower growth of the film industry; the lower-than-expected progress of recovery; the risk of supply of high-quality films; the risk of new depreciation affecting the profitability of companies; the risk of performance fluctuations caused by delays in the release of films and other projects; the risk that cinemas do not perform as expected; the risk of housing rental expiration; the risk of public health emergencies; and the risk of macroeconomic fluctuations.