Hengdian Film and Television issued an announcement: in 2023, the company's profit to mother was 135-180 million yuan, after deducting non-profit of 0.57 to 77 million yuan; 2023Q4's profit to mother was -1 to -559 million yuan (loss in a single quarter narrowed year on year, and 2022Q4 profit to mother - 211 million yuan). Key investment points in convergence between the company's return to mother and non-profit deduction for the whole year and the restoration trend of the national film industry

Repairs in the first three quarters of 2023 continued in the fourth quarter, the National Day gap was strong, and the company narrowed its losses in 2023Q4 and landed under pressure

The company's profit turned a loss into a profit in the first three quarters of 2023. The first quarter results were driven by the Spring Festival program, the second-quarter import gap was strong, the third-quarter summer vacation program helped the company continue to recover, the fourth quarter's National Day program did not perform well, and the industry was under pressure in November. As a result, the company's profit loss in the 2023Q4 single quarter but the loss narrowed year-on-year and fell under pressure. In October 2023, the company signed a cinema agreement with IMAX, highlighting the company's attitude towards the positive development of the subsequent film market and increasing IMAX cinemas in terms of user experience. In December 2023, the company plans to sell 39% of the shares in Hangzhou Film (transaction price of 76 million yuan), mainly due to improving the asset structure, focusing on the development of the main business, and improving asset operation efficiency, and completed the share sale and obtained 76 million yuan in payment in January 2024.

The movie market will pick up in 2023, and the cinema line market is expected to add everything from beta to α in 2024

The theatrical box office recovered relatively well in 2023 but did not exceed the peak in 2019 before the pandemic. Due to the low base in 2022 combined with the normalization of content scheduling in 2023, the national box office achieved a high increase in 2023, which achieved a better recovery compared to before the pandemic, and the recovery trend is prominent.

The company's annual profit reached 135-180 million yuan, which is in line with the industry's recovery trend; based on the recovery in the box office in 2023, animated films and domestic films will continue to support, and the box office market is expected to increase in 2024; the box office market is expected to increase in 2024; New Year's Day 2024 will gradually increase the company's performance in the first quarter of 2024, with a rich supply of offline movies. A recovery in demand is expected to drive the whole country in 2024 The movie box office has been added; judging from α, Hengdian Film and Television has a rich list of entries, and production of its own content continues. Apart from dividing the main box office, its own film and television productions are expected to enjoy alpha flexibility.

At the same time as demand for watching movies is sinking, the company is also balancing the national cinema layout. In recent years, along with the economic development of third- and fourth-tier cities, the movie viewing environment and visual efficiency has continued to expand. The sinking market has more room for development in terms of group size, frequency and average price; the company forward-looking layout of third- and fourth-tier city cinemas, and Hengdian Film and Television relies on chain management brand advantages and quality service to be competitive in the sinking market; however, at the same time, the company will also balance the layout of cinemas across the country. Second-tier, etc., through the creation of new self-managed films The hospital's project is steadily increasing its market share, and it is not ruled out to expand the scale through mergers and acquisitions of high-quality projects.

Profit forecasting

Maintaining a “buy” investment rating, predicts that the company's revenue for 2023-2025 will be 21.4\ 26.5 billion yuan, with a profit of 1.4\ 3.01\ 39 billion yuan respectively. The current stock price is 34.9 and 26.9 times PE from 2024 to 2025, respectively. In terms of investment, high-quality films are scheduled under the short-term schedule effect (the 2024 Spring Festival program participated in “Flying with Life 2”, “Let's Shake the Sun”), watch the inflection point of single-screen output in the medium term, and watch the supply of high-quality domestic content in cultural and film powerhouses for a long time With the rise and cultural export, both supply and demand are expected to continue to help the main business recover. At the same time, the subsequent decline in the market box office can be expected to increase, and they are also actively exploring new businesses such as short dramas, thereby maintaining a “buy” investment rating.

Risk warning

The risk that the growth rate of the film industry will slow down; the recovery is less than expected; the risk of the supply of high-quality films; the risk of performance fluctuations due to delays in the release of movies and other projects; the risk that cinema operations fall short of expectations; the risk that IMAX cinemas will not perform as expected; the risk of housing leases expiring; the risk of public health emergencies; the risk of macroeconomic fluctuations, etc.