Key points of investment

Incident: In the first three quarters of '23, the company achieved revenue of 1,321 billion yuan, a year-on-year decrease of 25.59%, and net profit to mother of 236 million yuan, a year-on-year decrease of 377.22%. Looking at a single quarter, the company achieved operating income of 472 million yuan, a year-on-year increase of 55.72%, and net profit to mother of 0.29 million yuan, an increase of 118.95 percent over the previous year.

Benefiting from the excellent performance of the summer film market, the company's performance grew. According to Cat's Eye Professional Edition, 2023Q3, the total box office of domestic movies (including service fees) was 19.311 billion yuan, an increase of 127.6% over the previous year.

The supply of high-quality summer content boosted the movie market, and the film market showed a full recovery. According to Cat's Eye Pro, as of 2023Q3, Bona Cinemas ranked 13th in the national cinema revenue, up 1 place from the previous year, accounting for 2.25% of the market share (excluding service fees). Due to the obvious recovery in the industry market and the increase in the company's market share, we expect the company's cinema business to grow rapidly in Q3. In 23Q3, the company achieved revenue of 472 million yuan, an increase of 55.72% over the previous year.

In terms of investment business, I look forward to the launch of “Blade Tip”. On June 21, '23, the film “Don't Call Me a Gambler” was screened. According to Cat's Eye, the film has accumulated 40.783 million box office hits.

Since Q3 is already in the late stages of the film's release, it only contributed a small amount of box office revenue in Q3, according to Cat's Eye Pro. Q4, the spy-type film “The Tip of the Blade” produced by Bona has been scheduled for November 24, 2023. The film is based on the novel of the same name by Mai, directed by Gao Qunshu, and starring Zhang Yi, Huang Zhizhong, and Lang Yueting, starring Cheng Taishen, Sha Yi, Gao Jie, Jin Shijia, Li Chun, and Zeng Mengxue, with special appearances by Nie Yuan and Huang Lu. Q4 is expected to contribute to the performance.

The company has a reserve of high-quality films, which is expected to give the company's performance flexibility in the future. The company has sufficient film reserve projects and will continue to support the film business. According to previous company announcements, “Ami Joins the Army”, “Dream of the Red Mansion”, “Trainee Eros”, “Burst Point”, “Let's Run Wild, Dad”, and “Boyhood” are in the process of being screened or post-produced. “Operation Red Sea 2: Operation Killer Whale” is about to begin filming within the year, “Wise the Legend” and “Sanxingdui:

Projects for “Future Revelations” and “Syndicate” have now been set up.

Profit forecast and investment rating: The company has abundant film reserves, and commercial film production as the main theme is already in a mature model, which is expected to benefit from improvements in the industry environment; considering that the company's performance in the first three quarters of 23 was lower than our expectations, we adjusted the net profit from 2023-2025 to 0.4/41/60 million yuan, corresponding to 2023-2025 PE 236/24/16 times. We are still optimistic about the company's film production capacity and box office space, and maintain a “buy” rating.

Risk warning: investing in movie box office falls short of expectations, market competition risks, movie release pace falls short of expectations