Introduction to this report:

The company has rich film and series projects. More than 30 films have been broadcast in the past two years, and it is expected to join the first echelon of domestic content production; the two short dramas “Let's Go Beyond! “Ah Juan” and “Guanfu Cat” are scheduled for the Douyin Spring Festival.

Key points of investment:

Schedules and broadcasts affect performance, and it is still one of the companies with the richest content reserves. The company plans to release the movie “Dunhuang Heroes” in the 2023 Lunar New Year program. The series has not reached the performance confirmation stage, and preparations for asset impairment have been calculated. As a result, we lowered our EPS forecast for 2023 to -0.16 yuan (previous value was 0.11 yuan). At the same time, considering the film's release schedule and the timing of the series schedule, the 2024-2025 EPS forecast was lowered to 0.39/0.47 yuan (previous value was 0.49/0.61 yuan), reference the 2024 average valuation of comparable companies, and the target price was lowered to 7.84 yuan to maintain the “gain” rating.

Incident: The company announced its 2023 performance forecast. It is estimated that net profit loss due to mother will be 120-180 million yuan, changing from profit to loss over the previous year. Non-recurring profit and loss will be 0.27-036 million yuan, and preparation for impairment will be RMB 11-1 to 130 million yuan.

The performance fell short of expectations, and the reserve project has yet to be screened and broadcast. The films that the company is expected to release in the next two years include “Dunhuang Heroes”, “Great Future”, “Lion Boy 2”, and “There is a Small Shop by the Clouds” and more than ten projects. Reserve series include “Snow Maze,” “From South to North,” and “Spring Wind and Rain.” In addition, there are a number of live action interactive movies and skits that have already been produced. Rich content reserves may release performance in 2024-2025.

The two short dramas will be released on the Douyin platform during the Spring Festival. On January 18, 2024, Douyin announced the 2024 Spring Festival short film list. The company produced the project “Let's surpass! “Ah Juan” and “Guan Fu Cat” will be broadcast during the Spring Festival. The latter was officially announced to be launched on Douyin on February 3. The company has a strong heritage in content production, and innovation in content formats is expected to bring new growth points.

Risk warning: Movie box office falls short of expectations, series payouts are slow, etc.