Event: November 4, 2023, the company's film “Dunhuang Heroes” was officially scheduled for December 22, 2023.

Major projects were not screened, and the results for the first three quarters fell short of expectations. In the first three quarters of 2023, among the projects in which the company participated, only the drama projects “Unmatched Beauty” (participation), “Hope” (participation), “Youth in the Fire of War” (participation, formerly “Our Southwest Union”) and the film project “Extremely Cold City” (distribution) were not the company's key products. Affected by the project production cycle and broadcast, some of the reserve projects did not reach the revenue confirmation point. At the same time, the company's innovative business investment, etc. increased, so the performance in the first three quarters fell short of expectations. According to the company's three-quarter report, in the first three quarters of 2023, the company achieved revenue of 184 million yuan, a year-on-year decrease of 13.37% from the same period last year (after adjustment), and a net loss of 32 million yuan, an increase over the same period last year (after adjustment).

Major projects have been scheduled, and products to be broadcast are fully stocked, and it is expected that they will be launched one after another to contribute more. Since entering the fourth quarter, the company's main investment and control projects have been scheduled one after another, including “Hot Searches” scheduled for December 1 and “Dunhuang Heroes” scheduled for December 22. Among them, “Dunhuang Heroes” is based on and adapted from Tang Fengyun's history of the Shazhou military and civilian return. It is the first live-action film of the company's exciting “China Youth Universe” in Beijing. It is the first live-action film of the company's Beijing “China Youth Universe”. It is the first time since “The 12th Hour of Changan” that director Cao Dun and screenwriter Ma Boyong joined hands with Daiyinmu. Zhang Miao is the producer and chief producer, and has a strong production team, which is expected to achieve excellent box office results.

We believe that according to the interim report, the company currently has nearly 40 movies, TV dramas+film projects in reserve. Many of these films have already entered an advanced stage. As major products are scheduled and broadcast one after another, it is expected that they will continue to contribute to increased performance.

Innovative business development on multiple lines, interactive dramas, virtual live broadcasts, cultural tourism IP projects, etc. are worth looking forward to.

In addition to multi-format film and television projects, the company continues to promote innovative projects and explore IP operations in multiple dimensions, including: 1) The full-length live-action full-video video game “Hidden True Detective”, co-produced by the company, Big Fish Express, and Bilibili Games, has completed post-production and is currently in the closed beta and approval stage, considering the recent live-action interactive video game “Done! I'm surrounded by beautiful women!” The popularity of the Steam platform and the short drama market are rapidly exploding. This innovative model is expected to help the company enhance its IP influence and monetization capabilities; 2) The company's virtual anchor of the same name modeled after “Xian Yu Qiang” in “Lion Boy” achieved good broadcast results on Kuaishou. As of June 2023, the number of fans on the account was nearly 500,000, the total number of live broadcasts exceeded 230 million, and the cumulative number of short video broadcasts exceeded 100 million; 3) The company's Yongxingfang Cultural Tourism and Business Tourism participated in the first innovative new immersive cultural tourism IP project in Xi'an “The 12th Hour of Changan” in Huan After the new upgrade, it resumed opening in August and became the company's offline IP operation position.

Investment suggestion: Looking ahead to 2024, the company's drama and movie business product lines are plentiful, and the release of projects one after another is expected to increase the company's performance. Since the timing of the preliminary project fell short of expectations, we lowered the company's profit expectations. It is estimated that the company's net profit from 2023-2025 will be 41 million yuan, 311 million yuan and 434 million yuan respectively, corresponding to the current stock price PE of 180X, 24X, and 17X, respectively, maintaining the “increase in holdings” rating.

Risk warning: Project progress falls short of expectations, movie box office falls short of expectations, strong regulatory policies in the film and television industry exceed expectations, technological progress such as AIGC falls short of expectations, and marketing business customers are losing ground