Company profile: National IPTV industry pioneer. Haijian Co., Ltd. is one of the representative companies of radio and television in China. Its main business is IPTV business, mobile media service business, and other businesses. The company signed IPTV cooperation agreements with the three major operators and exclusively operated the Shandong IPTV integrated broadcast control service business. At the same time, it also actively deployed cutting-edge technology development for new media, and planned and built six major industrial sectors, including Haiwan IPTV and Haidian digital applications. In 2018-2022, the company's revenue increased from 70 billion yuan to 1.02 billion yuan, and the four-year CAGR reached 10.1%.

Industry analysis: The IPTV market space is vast, and the growth of micro and short dramas can be expected.

IPTV: There is a logic of increasing volume and price, and I am optimistic that demand for IPTV will rise steadily. (1) Policy side: Local state-owned radio and television companies are expected to benefit from continued strengthening of support to accelerate the transformation and development of IPTV platforms. At the same time, the restructuring of large television screens is increased. (2) Application side: The underlying logic of industry data has changed, and application-side innovation is driving the continuous expansion of the industrial chain. IPTV is expected to achieve integrated content+functional service integration. (3) Demand side: The increase in the number of users+the increase in user revenue from value-added business units is expected to open up room for IPTV revenue growth.

Short dramas: The pace at which policies are being introduced is speeding up to help healthy development, and the growth of micro dramas can be expected. Short dramas are highly adapted to the short video ecosystem, and the market space is vast. Under circumstances where regulatory policies are being introduced at an accelerated pace to help healthy development and the bottom line of compliance is clear, the importance of the licensing qualifications of platforms that play a central role in the industrial chain is highlighted.

Business analysis: Consolidate the main IPTV business and fully expand new audiovisual business formats.

The advantages of multiple licenses are obvious, and the business model continues to be optimized. Shandong Radio and Television, the controlling shareholder of the company, has administrative licenses to engage in IPTV integrated broadcast control services, Internet television content services, etc., all of which have been renewed, and authorized the company to carry out corresponding services. In addition, the company has also obtained permission for the “production and broadcast service of web dramas (films)” required for the short drama business. The advantages of multiple licenses will help the company expand the potential market for terminals such as OTTTV and mobile terminals on the basis of deep cultivation in the IPTV market, and continue to optimize the business model.

The main IPTV business is steady, and the increase in volume and price is driving revenue growth. (1) Volume: The number of IPTV business users has increased steadily. The number of potential users in Shandong Province is large, and the penetration rate is lower than the national average. There is still plenty of room for growth in the number of users. (2) Price:

Basic and value-added businesses lead the industry in single-user revenue. By improving supply-side content richness and information technology to optimize the user experience, the company has made the return on investment efficiency of the IPTV business outstanding and the single-user revenue level leading the industry. Among them, the value-added business has a high single-user fee ceiling, which is expected to continue to increase performance.

New audiovisual business formats are being rolled out across the board to tap new momentum for performance growth. As the company accelerates the pace of transformation and upgrading, the content copyright service and platform operation service business are one of the company's subsequent driving points. Rich content resources help develop content service business and effectively enhance the company's core competitiveness. At the same time, the company's forward-looking layout of the micro-skit circuit expands platform operation and service business, which is expected to contribute new momentum to performance growth.

Profit forecast, valuation and investment rating: We expect Haijian Co., Ltd.'s revenue for 2023-2025 to be 9.76/10.60/1,171 billion respectively, with year-on-year increases of -4.39%/8.62%/10.45%, respectively. Net profit from 2023-2025 was 3.84/4.16/454 million yuan, respectively, up -7.24%/8.24%/9.28% year on year, respectively. The corresponding PE valuations were 40.2x/37.1x/34.0x, respectively. We chose companies in the radio and television industry that are also engaged in IPTV integrated broadcast control business as comparable targets, including Mango Supermedia, New Media Co., Ltd., and Pearl of the Orient. Referring to comparable companies in the same industry, considering that the company's IPTV penetration rate is low and that innovative businesses such as micro-dramas are expected to open up room for performance growth, it is reasonable to give it a certain valuation premium, it is reasonable to continue to pay attention, cover it for the first time, and give it an increase in holdings rating.

Risk warning: policy risk on the cultural supervision side; risk that the number of IPTV users will not increase as expected; risk of high customer concentration; risk of not updating information and data used in research reports in a timely manner.