Events:

October 24, the company announced the third quarter of 2023, the company's 2023Q3 revenue of 330 million yuan, YOY+18.0%; return net profit of 90 million yuan, YOY+42.1%; deducted non-return net profit of 60 million yuan, YOY+62.2%.

Main points of investment:

The rhythm of the episode schedule led to a month-on-month decline in 2023Q3's performance:

The company's 2023Q3 revenue is 330 million yuan, YOY+18.0%,QoQ+90.2%; return net profit is 90 million yuan, YOY+42.1%,QoQ-7.2%; deducts non-return net profit 60 million yuan, YOY+62.2%,QoQ-12.6%. The net profit rate of 2023Q3 was 27.4%, up 4.9pct from the same period last year; the gross profit margin was 39.0%, down 4.9pct from the same period last year. The expense rate during 2023Q3 was 22.3%, which decreased 1.6pct compared with the same period last year and increased 3.2pct compared with Q2. The month-on-month decline in 2023Q3 performance is mainly due to the increase in the pace and cost of the series.

[TV series] 2023Q3 premiere 3 ("all the way to Chaoyang", etc.), turn on 3 (including 1 platform customized short play), 3 kill youth ("Cheng Huan Ji", "Splendid and peaceful", "Kun Peng hits the waves"), "Seven Nights Snow", "one centimeter of sunshine", "a generation of military advisors" and other preparations. "our translator"Please fall in love with me like this" is expected to be broadcast on Q4.

[movie] the 2023Q3 host controls the release of "Burning Winter", and the participating film "ex 4" is released on National Day. The main control film "misjudgment" (S-level project) is expected to start in October, "Dear Mom" has been started, "my friend Andre" has been killed, and "the Wild Age" (starring Yi Qianxi and Shu Qi) is in reserve in the post-production of "Xunqin".

Copyright base continues to expand, self-developed AIGC tools film and television screenplay intelligent creation system launched:

(1) the company acquires Senlian Film and Television with its own capital of 485 million yuan ("White Deer Plains", "Water margin" and other more than 20,000 hours of film library) and completes the consolidation of Senlian Film and Television. The copyright base is expanded to 50,000 hours, and the value of the core copyright resources of film and television remains to be released.

(2) the "Film and Television script Intelligent Writing system" developed by AIGC Application Research Institute was launched in September for use by business teams. The system is based on the vertical model of self-developed screenplay. "Evaluation Assistant" can evaluate 200,000-500000 word scripts, and the evaluation time can be shortened from the previous 3 days to 5 minutes. "screenwriter Assistant" in the form of efficient workflow, improve the inefficiency of multiple rounds of dialogue.

(3) the strategic cooperation between the company and Huawei will be carried out in the aspects of digital copyright protection, the establishment of technical standards for film and television production and the application of artificial intelligence in the film and television industry.

Profit forecast and investment rating: as the leader of the domestic TV series industry, the company has a steady development of its main business and strong growth of innovation business. By the end of 2023Q3, the company's monetary funds and transactional financial assets exceeded 5.2 billion yuan, and abundant cash reserves supported the company's "film and television + technology" investment and AIGC layout. Based on the prudent forecast, we adjust the company's profit forecast and expect the company's 2023-2025 net profit to be 5.01max, which corresponds to an EPS of 0.26cm, a PE of 0.36and a PE of 19.85max, 17.05pm, 14.70X, maintaining a "buy" rating.

Risk tips: content market performance is not as expected, production cost / project development process / revenue recognition is not as expected risk, inventory impairment, core brain drain, accounts receivable impairment, policy risk, industry competition, valuation center down, market style switching and other risks.