The company's operating income in the first three quarters was 1.953 billion yuan, an increase of 59.37% over the same period last year, with a net profit of 236 million yuan, while the net profit of the same period last year was-106 million yuan, turning losses into profits. In the third quarter alone, the net profit of returning to the mother was 123 million yuan.
The number of cinemas and screens expanded as a whole, and the production business was fruitful: 1) in the third quarter, the company opened 8 new cinemas and 48 new screens. By the end of the reporting period, the company had opened 429 cinemas with 2735 screens, with a market share of 3.64%, and 83 cinemas with 468 screens, with a market share of 0.57%. With the further recovery of the market, the company has further improved its profitability by virtue of higher operating leverage, achieving a net profit of 123 million yuan in the third quarter, contributing more than half of the performance in the first three quarters. 2) the company's wholly-owned subsidiary Zhejiang Hengdian Film Co., Ltd. participated in the production of "wandering Earth 2", "Bear appears with me", "enthusiastic", "volunteers: male soldiers attack", "ex 4: British early Marriage" and other films were released, involving a wide range of subjects (including science fiction, animation, sports, literature and art, drama, etc.), and has a good performance at the box office in all periods, which effectively thickens the performance. The company's follow-up reserve has films such as "defiant 2" and "Save the suspect".
The film industry continues to pick up, with significant improvements on the supply side, projection side and demand side compared with the same period last year:
From January to September 2023, the national box office of films totaled 45.57 billion yuan, an increase of 77.5 percent over the same period last year, returning to 94.7 percent in the same period in 2019. The total number of moviegoers was 1.071 billion, an increase of 75.39 percent over the same period last year. The box office of the four films "Manjianghong", "wandering the Earth 2", "desperate her" and "she who disappeared" exceeded 3 billion yuan. And the national box office during the summer period (June-August) reached 20.62 billion yuan, breaking the historical summer box office record. Looking forward to the fourth quarter of 2023, a large number of high-quality films such as "Riverside mistakes", "second-hand masterpiece", "Save suspects", "Captain Marvel 2", "priceless Treasure", "Mr. Red Carpet", "across the Sea of anger", "three Brigades", "sneaking" and "Goldfinger" are to be released, which are expected to further contribute to the box office.
Actively layout low-line cities. The sinking market is dominated by the company's direct operation of cinemas, and the proportion of box office and moviegoers in third-and fourth-tier cities has continued to increase since 2014. In 2020, the box office share of third-and fourth-tier cities surpassed that of first-tier city companies for the first time, and the sinking market has become the second main force in the film market, and the company is expected to further develop the potential of low-tier cities.
Maintain the "highly recommended" investment rating. Considering the rapid recovery of the domestic film market, the company actively locates low-line cities, and actively participates in the distribution of films to provide higher flexibility for its performance, it is estimated that the company will achieve a net profit of 2.88 / 3.61 million yuan respectively in 2025, corresponding to a valuation of 30.5exp 24.4pm 21.2 times, and maintain the "highly recommended" investment rating.
Risk hint: the film release is less than the expected risk, the offline scene recovery is not as expected as the risk, and so on.